Q1 2014 comprehensive rates down 16.6% on same period last year, according to AA index
Motor premiums fell to their lowest levels since 2010 in the first quarter of 2014, according to the AA British Insurance Premium Index.
AA Insurance director Simon Douglas said the rate drops were being fuelled by a “price war” and that the “unprecedented falls” in the cost of cover could prompt some insurers to pull out of less profitable sectors of the market.
According to the latest edition of the British Insurance Premium Index, the average Shoparound price for comprehensive cover fell 16.6% to £531.24 in Q1 2014 from £636.85 in the same period of 2013.
The Shoparound price is a combined average of the five cheapest quotes from aggregators, brokers and direct insurers.
The fall in third-party fire and theft (TPFT) premium was even steeper. It was down 18.5% to £725.13 in Q1 2014 from £890.17.
Compared with the previous quarter, Q1 2014 comprehensive and TPFT rates were down by 5.6% and 8.4% respectively.
The AA said the last time the index showed lower premiums was during the second quarter of 2010.
Legal reform impact
While noting competition was the main cause of the rate drops, Douglas said that the legal reforms aimed at curbing whiplash claims, coupled with better fraud detection by insurers, had helped to put downward pressure on premiums.
But he added: “Despite this there is no evidence that this is delivering any significant reduction in the number and value of personal injury claims. It’s vitally important that the government continues to work closely with the insurance industry to bring tougher curbs to discourage whiplash injury claims, in the light of a new report showing that such claims are rising.
Douglas said that premiums were unlikely to fall further and that there was evidence that some insurers are either putting premiums up or resisting pressure to lower them further.