Research shows motor insurance premiums came down 1.4% since Q4 2012
Motor insurance premiums fell in the first quarter of 2013, according to the latest research by the AA.
The average quoted motor premium for the period was £746.75, a drop of 1.4% since Q4 2012. Over the past year, premiums have fallen 4.1%.
This is great news for consumers, but what will motor premiums do in the future?
First, the AA has noted that premiums could drop when motor insurers can automatically cross-check the details of those applying for cover against their DVLA history, meaning more potential fraud is weeded out.
Secondly, the effects of the Legal Aid, Sentencing and Punishment Offenders Act 2012 are expected to save insurers money, as spurious whiplash claims and legal costs related to personal injury claims are reduced. If these savings are passed on to the consumer, this results in lower motor premiums.
Then, there is the outcome of the Competition Commission probe into the private motor market. This is looking at how some parts of the insurance industry inflate credit hire and repair charges by up to £10 per driver. The findings of the probe are not due for another 18 months, but if the commission proposes a solution, consumers should see a further reduction in motor premiums.
The government is also keen for motor premiums to fall. The three insurance summits between government and the insurance sector over the past year have aimed to find a solution to the problem. With the issue so high up the agenda of the Department for Transport and Number 10, failure by the industry to implement lower motor premiums is not an option.
Finally, there are the advances in motor pricing that accompany telematics-based insurance. This is still an immature market in the UK, but it is expected to grow fast, and most motor insurers now have telematics propositions in place ready for this.
So, the signs are that average motor premiums will continue to fall, barring any unexpected events. Consumers will be pleased, but the outcome for the insurance sector is not so clear. The sector is generally unprofitable as it is, so if premiums fall further then the winners will be the insurers that can adapt quickly to the changing landscape.
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