Here’s a bit of good news that might take you by surprise: car insurance premiums are getting cheaper.
Rising car insurance costs have been a staple of conversation for years,
but maybe it’s time to find something else to moan about. According to the Association of British Insurers, typical premiums fell by 11% in the period stretching from the beginning of 2012 to the end of 2013. They came down from an average of £415 to £370.
YET TO SEE THE BENEFIT?Does this square with your own experience? If not, it could be because you’re renewing with the same insurer each year, rather than shopping around for a better deal. We find that insurers tend to reserve their best prices to attract new customers – existing customers usually see their premiums increase when they renew.
That’s why insurers make it so easy just to renew. They handle all the paperwork, you don’t need to lift a finger – and before you know it, the price increase has gone through on the nod. So if you want to grab your share of the premium savings, you need to grasp the nettle and find a better price when renewal time comes around.
WHY ARE PRICES FALLING?There are several reasons why prices are falling:
FIGHTING FRAUDIt’s worth dwelling on the scourge of fraud for a moment. Claims for personal injury have rocketed in recent years, despite the fact that the number of accidents (and injuries reported to police) has actually fallen.
The trend also contradicts the fact that modern cars, with their airbags, roll-bars and crumple zones, afford drivers and their passengers much better protection in the event of an accident.
Quite simply, criminal gangs have targeted insurance claims as an easy hit, joining opportunistic individuals (often spurred on in the wake of an accident by avaricious claims management companies) in pursuit of undeserved pay-outs.
One popular tactic is ‘staged’ accidents, where criminals cause an accident with an innocent motorist purely to create an opportunity to make a personal injury claim. Insurers and the police are increasingly alert to this sort of scam and are enjoying greater success in preventing or at least identifying it.
WHAT NEXT FOR PREMIUMS?So, are premiums likely to keep on falling? Or will they bounce and come back to sting hard-pressed motorists once more?
Again, we can be optimistic. The Competition Commission believes premiums are still too high – it thinks we’re paying £150-200m a year more than we need to, and is eyeing the costs associated with credit hire courtesy cars used in the wake of an accident. Also on its hit-list is the issue of sub-standard repairs (charged at full price, naturally) which inevitably lead to greater problems down the line.
Also under the microscope are ‘price parity’ clauses that some price comparison websites – not MoneySuperMarket – try to impose on car insurers. These clauses are designed to prevent insurers from offering a more competitive price elsewhere in the market and, to us, work to the detriment of consumers.
If such clauses are outlawed, we can expect an increase in competitive activity – good news for premiums.