Fuel cost drop means rising insurance bills

January 14, 2015 | By | In News

Drivers may have seen an unprecedented fall in fuel costs since June last year, however, the news for motorists may not be all good, as cheaper fuel could mean higher insurance costs, experts suggest. With the rapid decline in fuel costs, drivers are likely to use their cars more and this has resulted in increasing insurance premiums, reports The Telegraph.

With more cars on the road – in part due to the lower cost of petrol and diesel – traffic levels increase as a result, which can result lead to a subsequent increase in the cost of insuring a car as the associated risk of accidents rises. The price of the average insurance policy in Britain jumped by £12 – equivalent to two per cent – over the last three months of 2014, ending at an average figure of £594. This represents the first consecutive quarterly premium rise since 2011, according to figures from Confused.com – blamed on an increase in the number of accidents as motorists drive more.

Logically, insurers might expect more accidents and more claims [when the use of cars rises].

Supporting this theory, British drivers covered more than two per cent more miles in 2014 than the previous year, claims The Telegraph, with many drivers making the most of a near 20 per cent fall in petrol costs from summer 2014 to the end of the year. The average litre of unleaded petrol now stands at 108.10p while the equivalent for diesel is 115.53p, according to statistics from petrolprices.com.

A spokesman from analysts Towers Watson told The Telegraph that insurers are raising prices to maintain their profits: "Logically, insurers might expect more accidents and more claims [when the use of cars rises]”.

Helping to back up this theory, Department for Transport figures prove that more than 500,000 extra cars – nearly two per cent – were registered than at the end of 2013.

Picture: Kaspars Grinvalds

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