The car insurance market has seen a 39% average increase in premiums over the last year.
John Brady, Head of Commercial at John Lewis Insurance, explains why this has happened.
"One of the recent major changes to car insurance prices is that women will no longer benefit from lower premiums."
John Brady, Head of Commercial at John Lewis Insurance.
Q & A with John Brady
Q. What is pushing up the cost of car insurance premiums so drastically?
A. Changes in the economic market, climate and legal system have forced car insurance providers to increase their premiums in the last year. Here is my summary of some of the major changes that have pushed up premium costs:
Fraud and staged car accidents have increased costs for car insurance providers. The Insurance Fraud Bureau recorded as many as 30,000 staged crashes in the UK last year, with each claim averaging about £17,000. The car insurance market must absorb these fraudulent costs, which unfortunately drives up premiums for the UK’s honest drivers.
Uninsured cars also represent a significant risk and cost for the UK market. The Department for Transport estimates that about two million motorists were uninsured on the road in 2009 and that uninsured, untraced drivers kill 160 people and injure 23,000 each year. Insurance companies pay out for collisions involving uninsured drivers, which is reflected in the market’s increasing costs.
Personal injury claims incur high legal fees, which pushes increased costs into insurance premiums. The Association of British Insurers accounts for motorists paying an extra 10% on their motor insurance because of the high legal costs that car insurance companies pay when settling personal injury claims. Until there is a governmental reform to limit runaway legal costs, this trend is set to continue.
Continued bad weather leads to more accidents and therefore increased costs for everyone. In 2010 we had the worst English winter for 100 years; unfortunately this drop in temperature has led to a rise in accidents and a corresponding rise in insurance premiums.
Government Policy can also affect car insurance premiums. The European Court of Justice recently passed an anti-discriminatory ruling so that insurers cannot take a customer’s gender into account when calculating insurance premiums. Women currently benefit from lower car insurance prices because they are statistically less likely to have an accident. This ruling means that from December 2012 women’s premiums will increase and men may see a corresponding decrease in their premium.
Expert tips
Q. With all these changes, how can I keep my car insurance premium low?
A. There are a number of steps you can take to reduce your premium, despite these larger market shifts:
- Keep your mileage low as a high-mileage car poses a greater insurance risk.
- Secure your car with an immobiliser or additional locks to reduce your risk of theft.
- Pay a higher excess to lower your premium. This excess is the first part of any claim that you’ll need to pay – so be sure you’re happy to pay that amount in case you make a claim.
- Use our optional Excess Protection to claim back up to £500 in excess payments following accident repairs to your vehicle.
Find out more about car insurance premiums in our Car Insurance policy document.
Read our expert view on No Claims Discount.