A surge in expensive claims, repairs and an imminent tax rise are all to blame, says Consumer Intelligence
Average car insurance bills have jumped by more than 13% over the past year following a surge in costly claims, according to new data.
Motorists appear to be paying the price for advances in technology, as repairs to cameras, sensors and other hi-tech features can run into thousands of pounds. The bad news for drivers is that an imminent hike in the tax on insurance is likely to add a few more pounds to the cost of a policy.
Consumer Intelligence, a market research agency specialising in insurance and banking, said the average UK motor premium stood at £788, which represented a price rise of 13.5% in the year to August.
However, drivers in north-west England and London are paying up to 50% more than the national average. The average bill for a motorist in north-west England is £1,177 following a 17.3% leap over 12 months, while in London it has risen 16.7% to £1,068.
One of the biggest UK insurers LV= suggested prices were set to rise further this year.
Consumer Intelligence – whose figures are used by the government’s Office for National Statistics to calculate official inflation statistics – said there were “huge differences” across the country and between age groups. It compared the prices offered to 3,600 people by all the major price comparison sites and leading direct insurers.
Younger drivers are paying the highest bills: the average premium for an under-25 is £1,831, although prices for this age group are rising at a slightly slower rate. Older drivers are experiencing higher rises – typically up 15.3% over the year – but their average annual bill, as calculated by averaging out the five cheapest premiums, is much lower at £348.
Consumer Intelligence’s data shows that the cheapest place to insure a car is Scotland, where the average premium is £562.
On 1 October, the standard rate of insurance premium tax will rise from 9.5% to 10% – a change announced in the March 2016 budget to boost flood defences and inject cash into the most hard-hit regions. The government said that if insurers passed the cost of this increase on to their customers, the average motor insurance premium would rise by £2 per year.
Ian Hughes, chief executive of Consumer Intelligence, said: “The latest increase in insurance premium tax which takes effect next month, as well as rising claims, are driving the rise in premiums.”
LV= said on Monday that it was seeing motor claims inflation “at the top end of our expectations”, and that this was driven by increases in automotive technology making repairs more expensive.
LV= warned: “As a consequence of the combination of reduced investment income and higher claims inflation, we expect to see the strengthening of motor rates continue in the second half of the year.”