Car insurance premiums fall by 12.5 per cent

January 20, 2014 | By | In News

Despite the cost of motoring seemingly getting more expensive each year, car insurance premiums actually dropped by 12.5 per cent in 2013.

The average price of a comprehensive policy was £644 by the end of 2013, according to the Confused.com price index – some £92 less than the previous year.

Third party and fire and theft cover also came down in price, with buyers enjoying a 7.5 per cent (£85) saving on average.

While car insurance prices have been steadily decreasing over the last couple of years, the rate of reduction slowed in the last quarter of 2013 to just 1.1 per cent.

This meant that some policyholders actually saw small increases in their average premiums, including those in lower risk categories such as elderly drivers and motorists living in the Scottish Borders.

Male drivers as a whole saw a 0.9 per cent increase in average premiums at the end of 2013 – the first quarterly rise for two years.

While typically one of the highest risk insurance groups, young male drivers saw the biggest reductions in premiums in 2013, with the cost of a policy falling by some 24 per cent. This has been attributed to the Gender Directive, which came into force in December 2012, and forbade insurance providers from using a person’s sex as a factor to calculate their insurance risk.

Young female drivers have also enjoyed reductions in policy prices of between 12-14 per cent.

However, insurance experts are predicting that prices may be on the way up, with insurers becoming more stringent in their pricing policies.

Speaking to postonline.co.uk, Stephen Jones, UK general insurance pricing leader at Towers Watson, said: "There is growing evidence of a turning-point in the pricing cycle, with the rate of price reductions reduced considerably relative to earlier quarters, and some segments seeing modest premium increases.

“This suggests that the underwriting discipline called for following previous rate reductions is returning to the market, with insurers becoming more selective in their pricing strategies and with gender-neutral pricing bedded-down 12 months after its introduction.”

Picture: Fotolia

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