The sharp rises in motor insurance premiums are leading to more drivers withholding information when taking out a policy or exaggerating personal injury claims, the AA has warned.
The AA British Insurance Premium Index, which tracks the quarterly movement of car and home insurance premiums, has reported another yet another record has been broken according to this benchmark industry study.
Its average ‘shoparound’ premium – an average of the cheapest three quotes for each customer – for an annual comprehensive car insurance policy is now £892, a rise of more than 40% over the 12 months ending March. The average quote for a third party, fire & theft policy went up by 10.7% to £1532.62 – a 12-month increase of 82.1% – however it noted many insurers no longer offer this type of cover.
Simon Douglas, director of AA Insurance, said: “The record rises in fuel costs coupled with spiralling car insurance premiums is disappointing news and is making driving unaffordable for many, especially cash-strapped young drivers. “This is leading to more people withholding information when taking out a policy or exaggerating personal injury claims to try to reduce their costs. But this simply piles on costs for insurers and results in yet higher premiums for honest motorists.
“Despite the sharp premium increases, insurers are still making losses although the large underwriting deficits of 2009 have probably now been halved.” The main drivers of premium inflation remain fraud and injury claims, he added.
Mr Douglas said: “Although the number of collisions on Britain’s roads is falling, the number of claims for whiplash injury is rising. It’s tempting to make such claims with the huge number of accident management law firms using cold-call marketing techniques. According to the Association of British Insurers, for every £1 paid in compensation, a further 87p is paid in legal costs. Every day over 200 such claims are made, often for accidents that happened up to three years previously, for which no mention of personal injury was made at the time.
“Last year, we said that premiums quoted for young drivers were becoming unsustainable – and that now seems to be happening with many quotes for 17 or 18 year-olds being simply unaffordable.”
However, Simon Douglas believes that this might provide the impetus needed to make telematics or ‘black box’ pay-as-you-drive policies more acceptable. “They reward careful drivers, typically women, by reducing premiums and penalise those who take risks,” he says. The AA is expected to launch its own pay-as-you-drive policy later this year. Simon Douglas says that whilst price increases have continued into 2011, he believes that rises over the rest of the year will be much smaller. “I’d be surprised if they exceed 20% over the year,” he says. “As we enter 2012 I think we’ll also see new measures starting to take effect, such as Continuous Insurance Enforcement (which became law on 1 April); improved fraud controls such as access to the DVLA database for insurers and measures to control costs associated with personal injury claims, all of which will help to keep the lid on premiums.”
Premiums for home insurance have also risen to their highest ever levels. The shoparound premium for buildings cover went up by 14% over the 12 months to the end of March to £147, with the cost of a contents policy rising by 12% to £76. Over the first quarter of 2011 – a period when premiums usually show little movement – the typical shoparound premium for a comprehensive car insurance policy rose by 5.9% to £892.08; and by 40.1% for the 12 months ending 31 March 2011.
Source: PostOnline
