Car insurance prices fall as fears over payout changes subside

Car insurance prices fall as fears over payout changes subside

The average cost of car insurance has tumbled by more than a 10th over the past year, as fears subsided about potentially huge increases in payouts after car crashes.

The average cost of car insurance has tumbled by more than a 10th over the past year, as fears subsided about potentially huge increases in payouts after car crashes.

UK car insurance prices are falling at their fastest annual rate since 2014.

According to Confused.com and Willis Towers Watson, the average car insurance premium fell 11 per cent in the 12 months to the end of June, to £752.

The fall will come as a blow to motor insurers, whose share prices have come under pressure in recent months as fears have grown about the impact of falling prices on their profits.

Over the past three months, shares in Hastings have fallen almost 15 per cent, while Direct Line and Esure are both down by about 7 per cent according to data from S&P Global Market Intelligence.

Graham Wright, a personal insurance pricing specialist at Willis Towers Watson, said that conditions were becoming tougher for motor insurers. “Increasing competition for market share, combined with falling premiums, will begin to bite. These challenges come on top of the ongoing pressures on repair costs.”

One of the reasons for the fall in prices is that insurers are already pricing in the benefits of government legislation designed to cut the cost of personal injury claims.

The Civil Liability Bill, which was unveiled in March, is making its way through parliament. But Mr Wright warned that Brexit could delay its passage, potentially pushing back its implementation date from April 2019.

Read: 12 Important things you need to do to help reduce your bills for car insurance

Car insurance prices fall as fears over payout changes subside - THEKILLERPUNCH NEWS

Car insurance prices rose steadily between mid-2014 and mid-2017, but the proposed reforms to the way that large personal injury claims are calculated — and to the system for making smaller whiplash claims — reversed that trend.

There are fears that the fall in prices could go beyond the expected fall in claims costs. In a note to clients earlier this month, analysts at Barclays warned that: “market cycles tend to overshoot, particularly as all the listed players are looking for growth”. They added that they expected listed insurers to be cautious in their guidance to the market in the forthcoming half-year results season.

The tough conditions this year come after a strong 2017 for the industry. According to data from EY, it produced its best underwriting result since 1994 last year, due to rising prices in the first half of the year and uncertainty over the reforms to personal injury compensation.

“Insurers seem to have recovered from the shock of this dramatic change and have been able to soften their prices,” said Confused.com.

But car insurance premiums were already rising steeply before the Ogden rate change. Despite the 11% fall over the year, they remain significantly higher than the lows of 2008. 

Read: Car insurance: Simple tip could save you over £200 on your premium cost

Car insurance prices fall as fears over payout changes subside - THEKILLERPUNCH NEWS

Confused.com added: “Prices are still £37 more expensive than two years ago and £74 pricier than half a decade ago. And prices will need to drop by £253 before drivers benefit from the rock-bottom premiums of 2008 (Q2), when car insurance cost just £499, on average.”

The company says its figures are the most comprehensive in the UK, based on more than 6m quotes generated by the site every quarter.

The price paid by men for car insurance remains significantly higher than women, despite an EU gender equality directive that came into force in 2012, banning gender discrimination.

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