Five reasons your car insurance will get more expensive this year
It said an upsurge in theft – including keyless car crime, government changes to the way personal injury compensation is calculated and record repair costs are key factors pushing-up claim costs.
Uncertainty surrounding Brexit and the weakened pound have also increased the cost of vehicle repair claims by increasing the cost of imported parts.
Lee Griffin, chief executive of GoCompare Car Insurance, said: “We’re expecting this year to be another challenging one for car insurers, with a perfect storm of factors coming together to put further pressure on premiums.
“There are also concerns that as the government seeks to raise revenue, the rate of insurance premium tax (IPT) charged on car insurance – which currently stands at 12%, could come under the spotlight again, with some experts fearing it could rise to 20% in line with other insurances and VAT.”
IPT is a tax on insurers but providers typically pass the costs on to their customers.
Drivers are being urged not to accept their own premium rising as inevitable. The average customer can save £256 by shopping around.
Five reasons why car insurance premiums won’t fall anytime soon
Car theft is on the increase
Police crime figures show a 3% increase in vehicle offences, mainly as a result of increases in ‘theft or unauthorised taking of a motor vehicle’ (up 7%) and ‘theft from a vehicle’ (up 2%). Vehicle related offences have been on the increase since 2015.
The vulnerability of some cars to keyless entry theft, where thieves intercept the signal between the keyless fob and the car, is of particular concern to insurers.
More expensive cars are being stolen, increasing the average claim for a stolen car to over £8,000 in the second quarter of 2018 (up £3,500 from 2013 when records began).
Government change to the calculation of personal injury compensation (the Ogden discount rate)
The Ogden discount rate is a calculation used to determine the amount insurers should pay as compensation to people who have suffered life-changing injuries so that it will cover all their predicted future expenses, including loss of income and care costs.
However, because the compensation is paid in a lump sum, the amount is discounted to account for interest payments. Government changes to the rate further adds to the pressure on insurers’ costs, which will be reflected in higher premiums.
Sophisticated vehicle technology pushes-up repair costs
Advanced driver assistance technology systems such as automatic emergency braking, speed limit devices, blind spot and parking sensors help reduce accidents however, they are typically located in parts of a vehicle vulnerable to damage from impacts (i.e. bumpers and wing-mirrors) which makes repairs much more complex and expensive.
Insurers pay-out over £12m a day to repair damaged vehicles. The increasing use of sophisticated technology has also resulted in insurers categorising more vehicles as uneconomical to repair.
With economic uncertainty already causing a fall in the value of the pound, this has increased the cost of imported cars and replacement parts – further adding to the cost of vehicle repairs.
Despite insurers putting in place robust fraud detection systems and working with the police, motor insurance fraud remains a big issue.
Insurance fraud (including providing false information on an application, false or exaggerated claims and ghost (fake) brokers) pushes up the cost of cover for all motorists.
Industry figures on detected fraud show that car insurance scams are the most common and most expensive, with 55,000 dishonest claims worth £629m detected. Most (80%) involved personal injury fraud ranges from staged crash for cash frauds to opportunistic scams.