Pricing trend data could help insurers navigate the motor market post-FCA pricing reform, said price comparison site chief executive

Following comprehensive car insurance premiums falling for four straight quarters, the average cost of car cover has now increased for the first time since the autumn of 2020, with a price rise of 5% (£25) in Q4 2021, according to price comparison site and broker Willis Towers Watson (WTW).

The firms’ latest Car Insurance Price Index, published today (19 January 2022), also found that despite this quarter-on-quarter price increase, comprehensive car insurance premiums have fallen by 6% (£36) during the last 12 months, with UK motorists now paying £539 a year on average.

Tim Rourke, UK head of property and casualty pricing, product, claims and underwriting at WTW, attributed this drop to the Covid-19 lockdown and “intense competition” in the motor insurance market.

However, Rourke added that the quarterly premium increase reflects the “predicted volatility” around the FCA’s new pricing rules, as well as the increase in claims costs associated with eased lockdown restrictions.

The Car Insurance Price Index further identified west central London, which is the most expensive postcode for motor insurance, and Glasgow as having the greatest quarterly premium increases (10%) for comprehensive motor cover. Premiums in these locations are £1,079 and £525 respectively.

Despite a 6% premium rise last quarter, Llandrindod Wells in Wales continues to be the cheapest area for car insurance, with drivers paying an average of £326 a year.

Competition commenced

Rourke continued: “How insurers respond to the [FCA’s] new rules through pricing and product strategy will determine just how turbulent the next few months become.

“The pandemic will continue to put insurers under considerable pricing pressure as wholesale society changes evolve and disrupt the market, exacerbated by claims inflation potentially rising further in 2022 and the long-term impact of the whiplash reforms still [being] unclear.”

Demographically, young male drivers aged between 21 and 30 saw motor premium increases of 6% to 8%, boosting premium prices for those aged 21 to 25 up to £1,147. Motorists aged between 26 and 30 pay an annual average of £858 for their car cover. chief executive Louise O’Shea said: “What we could also see now is an incredibly competitive market.

“Insurers can no longer offer discounts to differentiate between new business and renewal, so we could start to see many companies looking at the way they are pricing to become more attractive to customers.

“With this, insurers could be seeking out as much insight into pricing trends as possible, to see how other companies are reacting.”