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Car insurance costs hit new high

Car insurance costs hit new high

Category: Car insurance

Updated: 01/08/2016
First Published: 01/08/2016

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

For many people, car insurance costs seem to be only ever on the rise, with comparing alternatives the only option likely to lead to a better deal. Unfortunately, this trend looks set to continue, with latest figures revealing that car insurance is rising once again – and that the average premium has now hit a record high.

The figures, from the British Insurance Brokers' Association (BIBA) and Acturis' latest Insurance Price Index, reveal a "significant rise" in the cost of premiums charged for private car policies, with the average price paid in the first three months of the year rising by 11% compared with the same period in 2015. Not only that, but when combined with insurance premium tax (IPT), which has in itself risen by 66.7% over the same period, motorists are paying 15% more for the same level of cover, hitting the highest level ever recorded.

Theo Duchen, chief executive of Acturis, said that there are "continued pressures" facing the car insurance market, "which is why we have seen premiums on an upward trend since 2014. The increase in IPT simply accentuates the premium hike for all motorists, and especially those already facing high premiums".

These findings are backed by additional figures from the AA, which show that the trend continued into the second quarter of the year. Its latest British Insurance Premium Index shows that average premiums rose by 2.3% from the first quarter, with the typical quote for an annual comprehensive car insurance policy standing at £568.48. This is compared with a fall of 0.4% in the previous quarter, and a rise of 10.1% in the final three months of 2015, hinting that price rises are back in the foreground.

Meanwhile, the research also found that the average "Shoparound" quote – an average of the five cheapest premiums for each "customer" in a nationwide survey – also rose, this time by a whopping 17.2% year-on-year, with the typical quote over the 12 months to 30 June standing at £484.86.

Despite the increase, the fact that this average is far less than the overall typical cost clearly highlights the benefits of shopping around – but ironically, it could be this that's helping fuel the rise in premiums.

Michael Lloyd, director of insurance at the AA, explains: "Increasing numbers of car owners shop around for their cover every year, especially at a time when premiums are going up. As more people look for introductory offers, there is less incentive for companies to offer loss-making prices to attract new business that will, a year later, go elsewhere. I believe this is one driver of recent premium increases while insurers are looking for ways to better reward customer loyalty."

However, he acknowledges that there are plenty of other challenges facing the industry, such as exaggerated claims for whiplash that remain "unacceptably high", largely thanks to the persistence of cold-calling claims management firms, together with the rising costs of crash repairs as vehicles become more complex and a rise in uninsured drivers, all of which are helping to keep premiums higher than they should be.

As a result, the upwards trend is largely expected to continue, which makes it more important than ever to shop around. Use our car insurance quote tool to get started and see if you can find a cheaper premium.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.