Gap narrows between direct and broker premiums
The June floods had little effect on motor insurance premiums in the direct market during quarter three, according Experian®, the global information solutions company.
Experian’s latest Motor Insurance Benchmark has revealed that the average quote for comprehensive cover in the direct market reached £567.30 during quarter three (July, August and September), but it was only 0.8 per cent higher than the average quote in quarter two (£562.70) despite the recent floods.
The broker market, however, saw a large increase in the average premium rate compared to the previous quarter for both comprehensive and third party, fire and theft.
Insurance premiums shot up in July (comprehensive from £495 in June to £538 in July and third party, fire and theft from £570 to £632) and continued to climb for the rest of the quarter.
The average quote of £639.70 for third party, fire and theft insurance premiums in the broker market is now at its highest point for any quarter since July 2005, when Experian started collating this information.
However, the increase in broker prices follows a dip during June, when broker prices fell to their lowest point since July 2005 for both comprehensive and third party, fire and theft.
David Murby, managing director of Experian’s Insurance Service division, said: “The June dip in broker prices is probably a result of new products being brought onto the market and, therefore, being priced more competitively.
“However, the subsequent increase in broker premiums is not a result of the floods that month. The broker market tends to react slower than the direct market to events such as flooding, so the increases we are seeing now are highly likely to have been pending prior to the floods.
“For nearly two years, comprehensive motor insurance premiums in the direct market have been higher than in the broker market. However, the recent increase in broker prices means the gap between the two markets is closing and broker prices have almost reached the level they were at two years ago, before they started dropping.
“The true impact of the floods is likely to manifest itself in insurance premiums over the next few months in the direct market once claims have been settled and insurers have been able to assess the real impact. The broker market is likely to follow suit.”