Home Industry News The AA index shows that car insurance premiums are falling

The AA index shows that car insurance premiums are falling

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Car insurance premiums continue to fall according to the latest benchmark AA British Insurance premium Index, covering the first quarter of 2013.

The average quoted premium for an annual comprehensive car insurance policy, as tracked by the AA Shoparound summary, is £746.75.  That’s a fall of 1.4% over the first three months of 2013.  Over the past year, premiums have fallen by 4.1%.

The figures are reached by averaging the five cheapest quotes from a range of premiums from insurers and brokers as well as from price comparison sites, against a fixed basket of risks.

Simon Douglas, director of AA Insurance, says that the continuing falling trend will be welcomed by consumers who, over the past three years, have faced some of the biggest premium increases ever recorded by the Index.

“Car insurance has not been far from the headlines for all the wrong reasons as insurers struggled to balance premiums against claims costs,” he says. “Sharp hikes in personal injury claims, fraud and uninsured drivers, to say nothing of last year’s gender directive and changing regulations, have all helped to pile on the pounds.

“But there are other changes that I expect to help this downward premium trend,” Mr Douglas says.

On 1 April, the first parts of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) were introduced, with others following later in the month and in July.

Key reforms include

– A complete ban on the payment and receipt of referral fees for any claim that includes a personal injury

– Controls to ensure that costs are proportionate to the damages

– ‘After the Event’ insurance premiums (often called ‘additional liabilities’) and solicitor success fees can no longer be recovered from the defendant in an injury claim

– Fixed legal fees for road collision claims valued at under £10,000 will reduce from £1,200 to £500 and;

– The small claims court limit for personal injury claim cases where legal costs can’t be recovered will increase from £1,000 to £5,000.

“These should go some way towards bringing no-win no-fee type whiplash injury claims under control and will thus reduce the costs of claims,” Mr Douglas says.

The Government still continues to focus on car insurance and the Transport Committee of cross-party MPs is currently exploring the very British phenomenon of soaring whiplash injury claims.  The Ministry of Justice has also just finished a consultation on whiplash injury.

Mr Douglas hopes that these will bring further reforms to bring the number of whiplash injury claims under control, pointing out that 70% of those in crashes on Britain’s roads make a claim for injury even if no injury has been suffered, amounting to some 570,000 claims per year, costing £2bn.

“This is a shameful record that makes the UK the ‘whiplash capital of Europe’ – in France for instance, only 3% of crashes result in a personal injury claim,” he says.

The AA would like to see measures such as a part of legitimate injury payments being made direct to providers of rehabilitation services such as physiotherapy; independent medical examination of whiplash injury claimants; and, adoption of a similar system to that in Germany and Austria, where low-speed crashes are not eligible for whiplash injury claims.

In a separate initiative, insurance companies are expected to be allowed to cross-check car insurance applications against the DVLA (Driver & Vehicle Licensing Agency) database from next year.

“We know that an astounding 23% of motorists wrongly declare their driving history to insurers, either not declaring convictions or disqualifications, or declaring something less significant when they take out car insurance

“Many more provide other false information such as age, driving experience or even address in order to obtain a cheaper insurance premium.  This is unfair to safer, honest motorists and adds to the cost of insurance.”

The AA’s own research* shows that the public overwhelmingly support such a move.

Insurers are now starting to cut premiums in anticipation that that these various measures will reduce costs.

“I expect the downward trend to continue, which will be welcome news for consumers,” he says.