You are here: Home - Insurance - News -

Home and motor premiums start to rise but further hikes expected

0
Written by:
21/07/2015
Home and motor insurance premiums started to rise in the second quarter of 2015, according to the AA, which warns further increases are likely thanks to the Insurance Premium Tax hike scheduled for November.

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.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Seven ways to get help with energy bills this winter

We knew today’s announcement was going to be painful, but it’s still a shock to the system. When this kick...

Flight cancelled or delayed? Your rights explained

With no sign of the problems in UK aviation easing over the peak summer period, many will worry whether holida...

Rail strikes: Your travel and refund rights

Thousands of railway workers will strike across three days this week, grinding much of the transport system to...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week