Home and motor premiums start to rise but further hikes expected
The AA’s British Insurance Premium Index shows that the average ‘Shoparound’ quote (a median figure based on the five cheapest quotes available) for a typical comprehensive motor insurance policy has risen to £549.46 – a 5.2 per cent increase – during the three months to 30 June 2015.
This brings to an end three years of premiums falls, thanks to a fiercely competitive market.
This rise has disproportionately impacted younger drivers, with motorists aged 23-29 enduring a 6.2 per cent jump (to an average of £682.62). Those aged 70 and over saw the smallest rise, a 3.8 per cent jump (to £392.13).
Meanwhile, average buildings and contents insurance premiums have risen for the first time since 2012, according the AA data, with standalone buildings and contents policies each rising by 1.3 per cent.
The average quoted premium for a contents policy now stands at £61.18 (up 77p) while that for buildings is £108.15 (up £1.34).
The AA believes that premiums will continue to increase, exacerbated by the Government’s 58% increase in Insurance Premium Tax (IPT), announced in the recent Budget and which comes into effect in November.
Janet Connor, managing director of AA Insurance, said: “Thanks to bruising competitive pressure, insurers have been releasing their reserves to maintain their competitive edge to the point where this is no longer sustainable, and we are seeing premiums beginning to rise once more – price rises are inevitable.
“The stealthy imposition of a 58% increase in insurance premium tax (from 6 per cent to 9.5 per cent) was not expected and it has come at a time when insurers have no capacity to absorb that cost and will have to pass it on. It will add around £5 to the average home policy, and £18 to a typical comprehensive car insurance policy.”
“Increasing IPT will have unintended consequences. Not least is that more people are likely to shop around. This could lead to introductory offers drying up as insurers re-think their pricing. That will lead to a much sharper average increase than the tax rise suggests. I also fear that those on the lowest incomes may consider driving without cover, undoing the good work carried out to bring down the number of uninsured drivers. If that happens, it will also put more upward pressure on premiums.”