The average premium has dipped below £600 for the first time since 2009
Motor insurance prices have fallen sharply, by 7.5%, in Q1 2014 compared with Q4 2013, which only saw a fall of 1.1%, according to the latest Confused.com motor insurance price index in association with Towers Watson.
Premiums fell by 3.9% in Q3 2013 and 7.9% in Q2 2013.
It means that comprehensive motor insurance premiums have fallen by around 19% in the last 12 months. Average prices across the UK have fallen by £140 to £596. This is the first time premiums have dipped below £600 since 2009.
The slowdown in the pace of reduction in Q3 2013 led analysts to believe that prices were bottoming out at the end of 2013 – an indication of a more cautious approach by motor insurers to developments in the market, including the ban on referral fees and restrictions on claims legal costs.
Towers Watson UK head of P&C pricing Stephen Jones said: “This quarter’s price reductions are sizable, even allowing for the fact that motor insurers may wish to be tactically competitive around this time of year because of growing new vehicle registrations and the pattern of market renewal dates.
“Further contributing factors could include optimism surrounding potential reforms in the medical assessment of whiplash and action that may be taken on third-party repair and hire costs.
“Another factor to consider is that some insurers declared increased reserve releases when announcing their year-end results, perhaps indicating growing confidence in their understanding of the claims cost impact of recent legislative changes, including Laspo [The Legal Aid, Sentencing and Punishment of Offenders Act 2012].”
Third-party, fire and theft (TPFT) premiums have fallen by an average of 18% since April. This reduction has been helped by an 8.9% reduction in the first quarter of 2014.
According to Towers Watson, this has resulted in a typical £210 annual saving on a TPFT policy, taking the average premium back below the £1,000 level to £959.
Telematics is also contributing to the reduction, as a growing number of telematics providers are on price comparison sites and they are more frequently coming up with the cheapest quote, particularly for young drivers.
The average premium for a 17-year-old has fallen by nearly 39% in the last year, while 18-year-olds have also seen falls of over 30% on average.
Confused.com head of car insurance Gemma Stanbury said: “The fact that these falling prices are being experienced by drivers of all ages and genders, right across the UK, means that motoring is becoming more affordable for everyone. This is great news for young drivers in particular – 17 year olds have seen fantastic savings over the past year of nearly £1,400 on average.”