U.K. car insurance premiums rose 1.8 percent in the first quarter of 2017, with motorists now paying an average of £781 ($949), which is £110 ($134), or 16 percent, higher than average premiums paid in the same period last year, according to data compiled by Confused.com and Willis Towers Watson.
A key factor in the quarterly increase was the U.K. government’s decision in February to cut the “Ogden discount rate” from plus 2.5 percent to minus 0.75 percent, effective on March 20, said Willis Towers Watson. The Ogden tables are used by insurers to calculate payouts for personal-injury claims.
As insurers adapt to the Ogden changes as well as the June hike in the insurance premium tax to 12 percent, premiums could rise past the £858 ($1,000) peak seen in 2011 and even rise to a record level of £1,000 ($1,200) in 2018, said Steve Fletcher, head of Data Services at Confused.com, a price comparison site, which is a subsidiary of U.K. car insurer Admiral Group.
Over the past four years, U.K. motorists have been able to obtain premium decreases every January, “largely driven by price competition between insurers during the renewal season in order to meet volume targets,” said Stephen Jones, UK head of P&C Pricing, Claims and Underwriting at Willis Towers Watson.
However, the benefits of this year’s January premium decrease of 1.8 percent “were swiftly canceled out by a 3.5 percent rise in March,” said a statement issued by the two companies.
Without these January reductions, Jones added, “the immediate impact of the Ogden rate cut would have been far more painful for motorists in the first calendar quarter.”
Premiums also have increased for newer and higher value vehicles, “especially brand new ones which are increasingly technology-laden and as a result can cost more to repair,” said Jones.
Meanwhile, the cost of third party, fire and theft (TPFT) policies has risen sharply compared to the same period in previous years, with prices going up by 7.9 percent in the last quarter, significantly increasing the average quoted premium by £103 to £1,414 ($1,718) – an annual increase of 25.4 percent, said the findings of Confused.com’s Car Insurance Price Index, which is based on price data compiled from almost two million customer quotes.
Source: Willis Towers Watson/Confused.com
Related:
UK Insurers’ Reserve Strengthening Likely After Personal Injury Discount Rate Change: A.M. Best
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