The average price of car insurance is at an all-time high, with a fully comprehensive policy costing £481 in the last quarter of 2017, up nine per cent on the same period the previous year.
Official figures, released by the Association of British Insurers (ABI), also show the cost of cover has surged by 29 per cent since 2014.
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The ABI cites rising repair costs, fraudulent whiplash claims and Insurance Premium tax as being behind the price rises, which have added an average of £40 to drivers’ annual insurance bills.
Rob Cummings, head of mobility and liability for the ABI, said the Government should act to reduce insurance costs: “The Government must urgently bring forward relief for motorists by introducing its reforms to create a fairer compensation system, and tackling low value whiplash style claims without delay, as well as freezing Insurance Premium Tax. It is time cash-strapped motorists got a break.”
Explaining the increases, Cummings said: “Changes to how compensation pay-outs are calculated, Insurance Premium Tax, more whiplash-style claims and rising repair bills are all piling on the pressure for cash-strapped drivers.”
Changes to the ‘discount rate’ – used to calculate how much insurers should pay in compensation cases - are also said to be hitting premiums for consumers.
Separate research by the AA, meanwhile, found car insurance premiums in the fourth quarter of 2017 were up 2 per cent over the same period in 2016. However, the AA’s figures are based on quotes, while the ABi’s are based on prices paid.
Nonetheless, the AA’s insurance director, Michael Lloyd, warned costs could still increase in 2018: “As we enter 2018, the reinsurance companies that underpin the consumer insurance sector are increasing rates quite sharply, reacting to the discount rate and that will find its way to the premiums drivers pay."
Lloyd said future price increases could be avoided, however: “Rises could be tempered if the government presses ahead with its planned reforms to curb the whiplash compensation culture and succeed in stopping cold-call law firms who try to persuade people to make claims following a car collision, even if they haven’t been injured.”
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