But rate of decline could be slowing as insurers eat into reserves and premium cuts become unsustainable
The cost of motor insurance has fallen by a record 19.3% over the last 12 months, according to the AA British Insurance Premium Index.
The average comprehensive policy cost £504 during Q2 2014, compared to £625 for the same period in 2013.
This is the eighth successive quarter in which premiums have fallen, and is the greatest annual drop in the index’s 20-year history.
But AA Insurance director Simon Douglas said that despite the record fall, the rate at which premiums of falling could be about to slow down.
“This could be the ‘last hurrah’ for cheaper car premiums,” he said. “These falls are now becoming unsustainable as insurers are digging into reserves to maintain their competitive edge.
“Some insurers are starting to resist pressure to cut premiums,” he added.
And Douglas said that insurers cutting rates in anticipation of the benefits of legal reforms that did not materialise was largely to blame.
“Although the number of injury claim lawyers cold-calling potential claimants has sharply fallen thanks to the reforms, the number of claims remains stubbornly high,” he said. “While there have been modest savings in legal fees, it remains the case that too many people are still prepared to make some money from insurance companies, either by deliberately causing crashes or exaggerating whiplash injury for even very minor collisions.”
Douglas did, however, provide a warning for the industry, saying that, despite industry initiatives such as MyLicence being launched in recent months, the industry was not set for big gains in premium levels.
“I certainly don’t anticipate the sharp rises we saw during 2010 and 2011, when premiums rose by more than 40% in just 12 months,” he said. “But a lot rests on further measures being introduced to stop dishonest people from seeing insurers as a soft touch for personal gain.”