Aggregator websites blamed for suppressing rate increases
The private motor market's recovery could be under threat as new figures indicate rates are set to soften in 2007.
According to data from insurance benchmarking specialist Consumer Intelligence, motor rates have peaked and flattened out.
In the four months from December 2006 to March 2007 rates rose by 0.64%. This is significantly lower than the annual change of 5.28% for the period March 2006 to March 2007, said Consumer Intelligence.
The company predicted that in 2007 rates would fall in real terms. It highlighted the emergence of price comparison 'aggregator' websites in suppressing rate increases.
Ian Hughes, managing director of Consumer Intelligence, said: "Over the past 12 months we have seen initial premiums for motor insurance hardening, with some of the higher risk categories worst affected.
"However, consumers are voting with their wallet and companies are having to reduce prices again to keep business."
The market had been particularly affected by some of the price comparison services which now offered consumers the opportunity to quickly and easily shop around, he said.
"We anticipate that prices for the rest of the year will go up at a level which is equal to or less than inflation – a net reduction," he said.
Private motor rates have risen in recent months, fuelling hopes that the market was on the verge of recovery. It has not made a profit since 1994.
Motor giants Norwich Union (NU) and Royal Bank of Scotland Insurance led the charge in hiking motor rates last year, with NU committing to a 16% rise.
According to AA Insurance, average comprehensive premiums rose by 4.35% in the last quarter of 2006.
But leading personal lines brokers have questioned the extent to which rates are increasing. Patrick Smith, chief executive of Swinton, told Insurance Times: "Insurers say they are putting up rates and holding them up there, but we have no evidence of that happening."
One leading insurer commented: "For intermediaries it is all about retention at the moment. Special offers and discounts are helping to keep rates down, despite what insurers are doing."