Insurance premiums at record levels for young and old drivers
Drivers in nearly all age groups are paying record amounts for their car insurance and a further wave of increases will take place between now and January 2018, the insurance trade body warns.
Between 2015 and 2016, all age groups apart from the under 21s faced increases in their average car insurance premium.
Those in their late 50s and late 80s faced the highest rises – nearly £35 in the year but those aged 66-70 paid the least for cover at £260.
Figures from the Association of British Insurers (ABI) reveal that those aged 18-20 who pay the highest average premium of £973 a year, have seen the price fall by £24 as the use of telematics is keeping costs down.
Overall, the average premium paid in Q1 this year stood at £462, up 8% since Q1 2016, adding an extra £33 a year to the cost of insurance.
The figures give a glimpse of insurance costs even before the government’s decision to cut the personal injury discount rate which will increase claims costs and lead to higher premiums, according to the ABI. The three recent increases in Insurance Premium Tax will also have an impact on the cost of insurance.
The ABI has also warned that these cost increases will put pressure on insurers to raise premiums still further between now and the beginning of next year. Reinsurance renewals are due around now or at the beginning of 2018. Many insurers choose to reinsure against large risks, such as catastrophic personal injury claims, which means some of the impact of the recent change will have been absorbed by existing reinsurance contracts.
Hpwever, given the size of the discount rate cost impact, reinsurance premiums are likely to increase on renewal, adding to insurer costs which will inevitably feed through to customers.
ABI director general, Huw Evans, said: “With inflation on the rise, motor premiums at a record high and the public purse under pressure, it’s concerning that the government has yet to commit to delivering a fairer system for setting the personal injury discount rate. We’re pleased the government is going to bring forward a Civil Liability Bill to reform whiplash style personal injury compensation, but the benefits could be wiped out if they don’t defuse the discount rate bombshell.
“At a time when politicians from all parties are calling for additional investment in public services, setting a discount rate that is fair for claimants, customers and taxpayers could contribute up to £1bn a year to help fund this.”