Towers Watson: UK car insurance premiums on the rise

08 December 2015 Consultancy.uk

Car insurance premiums for private vehicles are again on the increase, with the most recent quarter seeing a 4.8% (£29) increase to £629. Towers Watson, crunching numbers from Confused.com, notes however that the average contains considerable regional and gender related variation. Inner London is the most expensive region, while men are still paying around £64 on average more than women for their insurance.

The Confused.com Car Insurance Price Index, in association with Towers Watson, is a comprehensive index of the car insurance market within the UK. The index is released quarterly by Towers Watson, and is built up from the lowest five average quotes presented to the more than 2 million quarterly customer quotes on car insurance price comparison site Confused.com.

Changing premium per quarter

The most recent quarterly results indicate that the average quote for car insurance across all regions of the UK is up 4.8% (£29) to £629. The increase is the largest since 2010, and is a £47 increase on the same quarter last year when the average quote stood at £582.

Driving trends
The increase in premiums started in the second quarter of this year and ends a more than three year trend of decreasing premium prices. Since the start of 2012, premium prices dropped from more than £850 to a low of around £580.

Private car quarterly trend

The increasing trend is related to a widespread market reaction to increasing claims costs, especially on vehicle damage claims. Prices are likely to continue to rise as the Government’s increase in insurance premium tax, rising from 6% to 9.5%, came into effect in November. Technologies that are expected to see a long term decrease in insurance claims, such as driver assist technology and automatic breaking systems, are however, yet to start affecting premium trends.

Top regional premiums

The average trend across the UK varies considerably. Inner London car owners are quoted the highest average insurance premium at £1,016, Manchester and Merseyside car owners are paying an average of £830, while West Midlands and Northern Irish drivers pay an average £781 and £741 respectively.

Increasing premiums
The annual increase in premium prices also varies considerably across the UK. The biggest increases are seen in the West of England, up 12% (£53) yet still well below the UK average at £493, followed by the East, at 11.2% (£52) to £520. The hardest hit local region is Llandrindod Wells, where premiums are up 17%. The only location within the UK to see prices drop is Sunderland, where premiums fell 0.3%.

Top regional increases

Age and gender differences
Variations in premiums are also seen within different age groups. The 60 year olds were the hardest hit in Q3 as they saw their premiums increase by 8% (£29) to £393. This is followed by 50 year olds, whose average premium is up 7.5% (£38) to £548. 30 year olds have seen an increase of 6.3% (£39) to £660.

Gender still makes a considerable difference in average premium costs. In Q4, the average premium price for women stood at £593 compared to £657 for men. Young men, those between 17 and 20, still pay the highest premiums at £2,015 in Q3, while women in the same age group pay around 25% less (£1,512).

Men and women pay different rates

Reflecting on this quarter’s results, Stephen Jones, UK Head of P&C Pricing at Towers Watson, comments: “There’s been close attention given to premium change metrics during 2015 as the market has looked for signs that the trend of increasing prices has become established. Our monthly price index has shown rises now for five of the last seven months and, except for small market segments, finding reductions over the last 12 months is becoming increasingly difficult.” Steve Sanders, Finance Director at Confused.com, adds that: “It would seem that the days of cheap car insurance really are over – just like six years ago, we’re seeing substantial increases in prices for most UK motorists.”

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