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The onward march of car insurance premiums continues, with latest figures from the Association of British Insurers (ABI) revealing that average premiums have jumped by 8% over the last year to hit a record of £462 – and they could rise even more in the months ahead.
There are several different factors impacting the car insurance market at present, all of which are exerting cost pressures and causing a continued spike in premiums. The age-old issue of whiplash claims continues to provide particular fuel to that fire, while the increasing cost of cars themselves – and the heightened repair bills that follow – only add to claims costs and resulting premiums.
Then there are the more recent developments in the car insurance market, namely the significant cut to the discount rate, and the numerous hikes to Insurance Premium Tax (IPT).
The discount rate is a method of calculating serious personal injury payouts, where those who have suffered catastrophic injuries are awarded a lump sum. It's based on the returns of Government bonds, but now that those returns have turned negative once inflation is taken into account, the Ministry of Justice said it was forced to cut the discount rate to negative levels, too.
This means the rate has been cut from 2.5% to -0.75%, which is estimated to increase costs for insurers by up to £3bn as they'll have to pay out more for such claims – and consumers could be paying for it. You can find out more about the changes by reading our story from when the measure was first announced.
IPT has already seen two increases in the last 18 months, and it's set to rise again on 1 June, when it'll ramp up to 12%. This is up from the current level of 10% and double the rate of 6% seen before the run of increases began in November 2015, which means car insurance customers are literally paying the price – and as the ABI says, higher insurance bills "look inevitable" in June.
That's why the ABI is calling on June's newly-elected Government to do all it can to tackle continued price rises and reduce the cost of car insurance, hopefully ensuring the run of price hikes doesn't continue indefinitely.
"Despite rising costs, insurers are doing all they can to ensure that motorists get the most competitive deals possible," said Rob Cummings at the ABI, "[but] the industry can only do so much. It is important that whichever party is in government after the election commit to measures to help lower the cost of car insurance.
"Whatever the outcome, the new government must push ahead with reforms to tackle low value whiplash-related claims and introduce urgent reforms to change the framework for setting the Discount Rate."
Further price rises may be inevitable, but there are things you can do to reduce your own car insurance costs – and comparing car insurance deals is at the top of the list. Start the process by heading to our quote tool to see the kind of options available, and don't be afraid to ask your insurer for a better deal, either.
You should never renew automatically when your contract ends but should instead see what else is out there, and take those fresh quotes back to your insurer to see if they can better it. Haggling could make a world of difference, and even if it doesn't work, you can still be safe in the knowledge that you've found the best car insurance deal elsewhere! That way, even if average price continue to rise, it hopefully won't impact your own wallet too much.
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