Cost Of Car Insurance In UK Hits Record High After 11%Jump In 12 Months
Changes to compensation rules and rise in insurance premium tax blamed, as drivers pay £484 on average for annual policy
Comprehensive motor insurance was £462 in the first quarter of 2017, but rose to £473 in April, £480 in May and £498 in June. Ptuneograph: Alamy Stock Ptuneo
The cost of car insurance has soared by 11%, nearly four times the rate of inflation, over the past year, taking the cost of motor cover to a record high.
UK drivers are paying an average £484 for an annual insurance policy, up£48 in the last 12 months, according to the Association of British Insurers. It laid much of the blame on changes to compensation rules and an increase in insurance premium tax.
The 11% increase is the biggest year-on-year rise since the ABI began tracking premiums for private cars in 2012.
The price paid for comprehensive motor insurance was £462 in the first quarter of 2017. It rose to £473 in April, £480 in May and £498 in June, an average of £484 over the the second quarter.
Analysis by consumer organisation Which?, which will be published on Thursday, found older drivers have been hit the hardestand that failing to shop around could cost motorists over 65 as much as £500 a year.
The ABI said the increase in premiums partly reflected a rise in insurance premium tax from 10% to 12%on 1 June. The tax, which is applied to 50m car, home and private medical insurance policies, has doubled since 2015.
Another reason is the government’s decision to drastically cut the discount rateused to calculate compensation payouts when people suffer serious injuries as a result of a car crash or medical negligence, for example. Insurers say this will “overcompensate” those hurt in car accidents. Personal injury lawyers, however, argue that victims of accidents have for years been undercompensated.
Which? also blames mounting repair costs as motorists pay the price for advances in technology. Repairs to cameras, sensors and other hi-tech features can run into thousands of pounds.
The ABI said car insurance premiums would climb further next January when most reinsurance renewals take place. The new discount rate will add to the costs insurance companies pay to offset their own losses, which the industry group said would inevitably feed through to the premiums insurers have to charge customers.
The ABI said its motor premium tracker was the only published measure of the actual premiums paidby customers, rather than quotes. It includes price reductions as a result of no claims discounts.
Huw Evans, the ABI’s director general, said: “This dramatic increase drives home how important it is the government press ahead with a new framework for the discount rate and call a stop to further hikes in insurance premium tax.
“The UK is one of the most competitive motor insurance markets in the world, but the unprecedented increase in claims costs is driving up prices to record levels. Most younger and older drivers are likely to face increases even higher than this, hurting people who can least afford it.
Worryingly these increases are unlikely to be the end of the road if reinsurance premiums go up at the end of the year, adding further costs to insurers.”
The ABI figures are published on the day of a House of Lords debate on the government’s decision in February to cut the personal injury discount rate from 2.5% to 0.75%, the lowest in any advanced economy.
In the first case settled under the new compensation rules for serious injuries in March, East Lancashire hospitals NHS trust had to almost triple its payout to a 10-year-old girl left with cerebral palsy to £9.3m.
Just after the discount rate change the Office for Budget Responsibilitysaid the government now had to set aside an extra £1.2bn a year to meet the expected costs to the public sector – and it would push up car insurance premiums by about 10%.
Lord Hodgson, a member of the Lords secondary legislation scrutiny committee, has tabled a motion of regret for debate after the committee expressed dismay at a lack of an impact assessment.
But solicitors at Cartridges Law firm said: “The most seriously injured victims of accidents have, for many years, systematically been under compensated by a discount rate that was set artificially high.”
The Association of Personal Injury Lawyers added: “The way to ensure people with life-changing injuries receive the compensation they desperately need is to retain the current formula for calculating the discount rate.”https://amonpointtv.com/2017/07/18/cost-car-insurance-uk-hits-record-high-11jump-12-months/https://amonpointtv.com/wp-content/uploads/2017/07/ABCD-913.jpghttps://amonpointtv.com/wp-content/uploads/2017/07/ABCD-913.jpgGist