Paying your car insurance has long been something that motorists dread and with the news that the price last year rose by an average of £110, the dread isn’t going away anytime soon. And the worst news is that industry experts believe that the cost of most policies is going to increase again this year. But why are prices skyrocketing?
According to comparison site Confused.com, the average cost of car insurance in the UK was £781 for fully comprehensive in the year that ended in March 2017. This is a rise of £110 on the average cost for the same period the year before and has largely been blamed on the government changes to how injury pay-outs are made, forcing insurers to increase premiums.
The same research showed that average premiums for the 2017-18 period could set new records and there is the chance that average premiums could rise above £1000.
Reasons for the increases
One factor that has affected the cost of insurance has been how much claims now cost. Even a simple minor collision with some damage to a bumper can lead to a large repair bill for insurers. This is because newer cars have more and more sensors and cameras installed in such areas that can be damaged or misaligned if there is an accident.
However, the new formula for compensation calculation is one of the biggest causes of problems for motorists. The new formula came into effect in March saw premiums instantly increase by 4% on top of other changes.
The formula, known as the Ogden Rate, is used to work out how much money people should be given when they suffer from long term injuries. The increase means that companies are having to put aside more of the premiums collected to cover possible and past injuries and are passing on this increase to motorists.
To cap it off, the rate of Insurance Premium Tax or IPT also continues to rise. This took effect in June this year so will have an impact on the figures for the coming twelve-month period. The rate rose from 10% to 12% for most policies although there was no change to the higher rate of 20%.
This means anyone taking a new policy or making an amendment to an existing policy after June 1st will be paying an extra 2% on their premiums for the increase. The higher rate which is applied to travel insurance, some vehicle policies and mechanical or electrical appliance insurance are unchanged.
The figures generated by Confused.com are considerably higher than those produced by the Association of British Insurers who said that the average comprehensive policy in the last three months of 2016 had a cost of £462.
But they also admit the cost of policies is increasing due to a combination of these factors.
The picture around the country is also variable. For example, Londoners still pay the highest premiums and therefore have seen big increases, with the average London-based car policy costs £1514. The most dramatic rise by areas was seen in the Scottish Highlands where prices rose a staggering 21% during this period.
Men still pay nearly £100 more per year for their insurance than women while the over 66 age group saw the highest increase in the age groups of 23% on their average premium. Strangely, those aged 71 and over actually saw a decrease of 3%. The youngest drivers, 17-year olds, saw an 11% increase.
Combating the increases
Now, more than ever, it is important for drivers to shop around as different insurers still offer different prices for the same risk. If you use Churchill, for example, then use the Phone Them, Churchill car insurance contact number to get your renewal premium as early as possible then do some shopping around. Most companies will be able to provide you with a premium 30 days before your policy is due.
Make sure you check the details of the policy when shopping around to ensure you get like for like the cover. For example, if you have breakdown cover free of charge in your policy and the alternative doesn’t have the cover, how much more will it cost to add this? Always look at things like excess and protected no claims discount as cheaper isn’t always better.