Insurers set to drive premiums sky high
RUNNING your motor is about to get even more expensive following an inflation-busting increase in car insurance premiums.
Fraudulent whiplash claims and Chancellor George Osborne’s stealth taxes are primarily to blame for the fresh acceleration in costs, which has added £50 to the average motorist’s annual premium.
This is only the beginning as experts say that insurers are gearing up to drive premiums even higher.
The good news is that you could save hundreds of pounds by shopping around for cheaper cover elsewhere.
According to new research from MoneySupermarket.com the average motor insurance premium rose 12 per cent over the last year.
This is 24 times the inflation rate, which rose by just 0.5 per cent in the year to March, according to the Consumer Price Index. It leaves the average British motorist paying insurance premiums of £478 a year in the first three months of 2016, up from £428 last year.
Kevin Pratt, consumer affairs expert at MoneySupermarket, said recent premium rises painted a “bleaker picture” for drivers. “One of the main reasons for overall price hikes is the increase in insurance premium tax (IPT) from 6 per cent to 9.5 per cent last November.”
The Chancellor will follow this tax raid by raising IPT again in October to 10 per cent.
Pratt said: “Insurers are also charging more because of high payouts for whiplash claims, many of which are thought to be fraudulent.”
Motorists in some towns faced even greater price hikes, with drivers in Dartford, Worcester and Wolverhampton seeing premiums rise more than 20 per cent, Pratt added. “Local price increases could be the result of a surge in accidents or car crime. Each area will have its own story.”
Pratt said higher premiums should prompt drivers to hunt around at renewal. “Insurers like to save their best deals for new customers, so there is almost always a better deal to be had.”
The longer you have been with your insurer the more you are likely to save by switching, and Pratt said some motorists can cut their premiums by £232 a year.
Michael Lloyd, director of insurance at the AA, said Government attempts to cut fraudulent whiplash claims have stalled, with cases returning to their former levels after a brief dip.
He said: “Although the Government is planning further measures to curb injury claims, it is unlikely that insurers will discount premiums heavily on the assumption that costs will fall any time soon.”
CompareTheMarket.com’s director of insurance, Simon McCulloch, said rising motor premiums in 2015 will shock many motorists as it follows two years of flat premiums.
The leap in costs has hit motorists under 30 hardest, he said, with the average driver in that age group paying £1,095 a year. “While premiums costing over a £1,000 are usually paid by extremely young drivers and those with a high-risk profile or expensive cars, this bracket now encompasses many ordinary drivers under 30.”
McCulloch said drivers must do their bit to stoke competition by switching: “The more people shop around, the more competition there will be and the more downward pressure applied on pricing.”