20 March 2020
The rising cost of motor insurance
Motor premiums are rising sharply as insurers’ profits come under growing pressure from legislative change, increasing theft and rising repair costs – not to mention Brexit and tax.
In Q4 2019 the average comprehensive motor premium rose by approximately 5% compared to Q3. There is the promise of further rises in the pipeline. Indeed, many experts are forecasting that premiums will end the year at their highest level ever – exceeding the 2011 peak.
For the first half of 2019 motor premiums had been falling. In a highly competitive market, much of this was down to insurers pre-emptively pricing in expectation of a favourable change to the ‘Ogden’ rate. This is the discount applied to large personal injury compensation claims – such as those paid out after a life-changing car crash – to take account of returns once the lump sum is invested.
The belief was that the government would change the rate from the current punishing -0.75% to an arguably more realistic figure of 1%, or possibly even 2%. This would mean insurers having to pay out less money. In the event, the rate was only moved to 0.25%. This was quite a blow. It has hardened the market and is driving premiums back up again.
The industry is struggling with a significant increase in car theft. Home Office figures show thefts in England & Wales have risen by over 60% in five years, from 70,210 in 2014-15 to 114,660 in 2018-19.
Much of this is related to criminals exploiting the vulnerability of keyless technology, by hacking the owners’ keys. Car theft claims in Q1 2019 were the highest on record.
Rising repair bills
Car repairs, also, are becoming more expensive by the year, due to the growing complexity of the technology installed in newer vehicles. This has led to an overall increase in the cost of repairs. For example, in 2018 the average repair took a full hour longer than in the previous year.
Britain’s withdrawal from the EU may lead to a period of economic uncertainty, which could have the effect of pushing premiums higher. Even more important, is that since 2015 Insurance Premium Tax (IPT) has doubled to 12%. This means that in addition to any increase in direct costs, a further 12% is added to the premium. The average premium at the moment includes over £50 in tax.
James Groves, Commercial Division Assistant Manager comments:
“Centor’s specialist expertise in this market allows us to seek and obtain the most cost-efficient deals to suit your business needs. In addition, we can provide risk management advice and recommendations to help improve your risk profile and further contain cost.”
For more information, get in touch with:
020 7330 8707
For more information on Business Motor Insurance, click here.