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Kick for homeowners and drivers as insurance costs rise

Paloma Kubiak
Written By:
Paloma Kubiak

The average motor insurance quote costs £82 more in 2016 than this time last year while it’s a mixed bag for home insurance premiums, an index reveals.

The AA’s British Insurance Premium Index has found that a comprehensive car insurance policy has increased by £20 to £586 in the third quarter of 2016, also up on the £504 recorded in Q3 2015.

The ‘shoparound’ figures collated from the five cheapest premiums for each risk category, show a 3.7% jump in just three months while over the past year, car insurance cover has risen by more than 16%.

Drivers in Northern Ireland were hit hardest as their shoparound premium was 11% higher, taking cover to an average of £862, above the £723 cost for those living in London. Scotland was the cheapest with policies standing at £422.

Young drivers aged 17-22 saw a 3.6% increase in the quarter to take annual policies to £1,287, while older drivers saw a larger increase at 5.1% though their premiums are at the lower end at £474.

Michael Lloyd, the AA’s director of insurance, said two increases in the Insurance Premium Tax (IPT) over the year have added about £18 to the average car insurance cost and he’s urging the Chancellor to ‘keep his hands off’ in the Autumn Statement.

“Motor insurance is a mandatory requirement and there is absolutely no justification for further hikes in IPT in the Autumn Statement. Coupled with predicted price increases, any additional tax burden would simply add to the growing number of uninsured drivers.”

Mixed results for home insurance

In the three months ending 30 September, the AA’s index showed the average quoted premium for a typical combined home buildings and contents policy fell by 1.1% or £1.75 to £158. However this figure is still up 6% in a year, when the policy stood at £149 in Q3 2015.

Buildings insurance has actually fallen from £114.21 to £113.59 in three months, although it’s up by 13.6% from the £100 recorded in Q3 2015.

On contents only cover, Q2 2016 had priced in £61 but it’s actually risen to £642 in Q3 this year. Compared with Q3 2015, its up 8.4% from £59.

The figures suggest that someone buying a combined policy can expect to save about £17 compared with buying two standalone policies from the same insurer, hpwever it can also work out cheaper to buy buildings and contents policies from different providers.

Lloyd said despite the mixed results over the third quarter, the overall trend is upward: “Some commentators suggest that the home insurance sector is expected to begin showing losses as the year turns. Home insurance has become increasingly competitive as more customers shop around, particularly on price comparison sites.

“While this has tended to keep the lid on premiums, there is a cost in terms of commission paid by insurers whenever a policy is sold which may, paradoxically, lead to premium inflation.”