Car and home insurance rates both fall despite uncertainty: AA


The average shop-around premium for annual comprehensive car insurance dropped 3.9% over the third quarter of 2018, while home premiums also decreased by 1.2%, according to the AA British Insurance Premium Index.

The fall in the price of car insurance continues a downward trend in prices beginning in the second quarter of 2017, when premiums hit £733.47 – an all-time high. The average quote now stands at £628.24 with prices falling 9.9% in the last 12 months.

Third party, fire and theft premiums also fell and now stand at £955.21 on average – a drop of 6.2% from last quarter.

The continuing drop is attributed in part to expected savings stemming from the Civil Liabilities Bill, which is on track to pass into law by 2020, after passing through the House of Commons yesterday.

Janet Connor, the AA’s director of insurance, said: “A significant fall in the cost of car insurance is welcome news for drivers and, the average premium quote is now more than £69 cheaper than a year ago.”

However, Connor stressed that, though premiums continue to fall, there is significant uncertainty about a number of factors that could affect premiums in future quarters.

“The Civil Liabilities Bill has been delayed and there is concern that some of the measures included in the Bill may be watered down,” she said.

“Similarly, the government’s commitment to revise the so-called Ogden or discount rate on injury payments has also been delayed, but is expected during the first quarter of 2019.

“In addition, Brexit concerns and the value of sterling have seen the cost of imported car parts, vital for the car repair industry, rise.”

Uncertainty around Brexit, in particular the knock-on effect it could have on the timing of an adjustment to the Ogden rate, was also cited as a cause for concern by Willis Towers Watson earlier this month upon the release of the Confused car insurance price index. That index showed a slight rise in premiums.

Connor also raised concern about a possible increase in the rate of insurance premium tax in next week’s budget, saying: “The government has already committed to continue the fuel duty freeze which could put pressure on the Chancellor to increase IPT.”

“I strongly urge him to resist this ‘raid on the responsible’ that penalises both drivers who have no choice but to pay for insurance if they are to drive legally; and home owners seeking to protect their property. 

“It’s young drivers who take the brunt of this underhand tax because they pay the highest premiums.  It’s no coincidence that the number of people caught driving without insurance goes up after each increase in IPT

“While the Justice Secretary is seeking to reduce insurance premiums by stemming the excesses of claims management cold-callers, I’m concerned that the Chancellor is bent on taking it away by increasing the tax on premiums.”

The average home combined buildings and contents policy is now £161.87, meaning that though premiums are cheaper than they were last quarter, they are up 1.3% on the third quarter of last year.

Buildings premiums fell 1.4% to £118.67, while contents premiums fell by 1% to £59.22.

“Home insurance has become increasingly competitive as more people shop around for the best quote,” said Connor.

“Buildings premiums have been climbing since 2016 largely in response to the growing risk of storm and flood damage although 2018 has seen relatively few such claims since last winter. 

“However, the low rainfall over a long hot summer is leading to concern among some commentators that there may be a rise in subsidence claims over coming months.

“Contents premiums on the other hand, have remained relatively steady and are only about £1 more than the average Shoparound quote when the AA’s Index was launched back in 1994.

“Improved home security has led to fewer burglary claims.  According to the Office for National Statistics, households are now four times less likely to be a victim of burglary than in 1995, having fallen fastest since 2011 when home contents premiums peaked at £72. 

“However, ‘escape of water’, such as burst pipes, remains the top reason to make a home contents claim.”

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