Following four consecutive quarter-on-quarter price cuts motor insurance premiums have risen by an average of 1% for quarter three of 2018 according to the latest Confused car insurance price index – in association with Willis Towers Watson - amid uncertainty surrounding Brexit and its effect on reforms to the Ogden rate.
This quarter’s increase could signal the beginning of an upward trend in the cost of premiums, Steve Fletcher, Confused’s head of data insight, said: “Despite the decline in car insurance prices we have witnessed over the past year, it seems premiums are going up again and this time following a drop of just £100.
“The last time we saw a downward trend, premiums dropped by £279, but over a much longer period of three years. The data from this quarter suggests premiums are on the up and this time starting at a much higher base, which could mean the cost of car insurance could reach new highs. We expect this is due to drivers adopting vehicles with increasingly advanced technology, which makes for more expensive claims.”
The price index found the average comprehensive car insurance premium is £8 more expensive than it was in the previous quarter, coming in at £760. However, the rise follows four consecutive quarter-on-quarter price cuts since the third quarter of 2017, meaning that despite the latest increase, drivers are still paying £78 less than they were a year ago – a drop of 9%.
According to Willis Towers Watson, this quarter’s increase in prices reflects uncertainty surrounding an expected adjustment of the Ogden discount rate after a review that would commence following the passage of the Civil Liability Bill through parliament.
The Bill has passed out of committee but is currently awaiting a date for its report stage in the House of Commons, and there are concerns that the ongoing negotiations to leave the European Union could delay the Bill.
Stephen Jones, UK head of property and casualty pricing, claims, product and underwriting at Willis Towers Watson, said: “The significant reductions seen over the past year would have been difficult to sustain due to ongoing pressures on repair costs and the continued uncertainty surrounding both the timing and impact of the Civil Liability Bill and the anticipated adjustment to the Ogden rate.”
He added that while insurers would welcome the rise after multiple quarters of price cuts, “they face a number of uncertainties that are likely to trouble the market well into 2019, particularly concerning the risk that Brexit negotiations will impact the timing of changes to the Ogden discount rate.”
However, Fletcher too flagged the potential impact of the current political situation: “It could also be a reflection of the uncertainty that surrounds the UK with Brexit on the horizon.”
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