Motor premiums are continuing to rise despite the onset of the coronavirus (Covid-19) pandemic, with prices increasing 2.8% in the past three months, according to Consumer Intelligence.
Claims costs are driving the continued upward trend, which has seen a total increase of 5.5% in the past year.
Consumer Intelligence pointed to Association of British Insurers research showing that cars are becoming more hi-tech and newer models are costing more to repair as reasons for the cost of each claim steadily rising.
Another factor increasing the cost of premiums is the impact that’s still being felt from last year’s discount rate adjustment, which has forced insurers to pay higher compensation payouts to accident victims.
John Blevins, pricing expert at Consumer Intelligence, explained: “Motor pricing is currently being steered by rising claims costs and the continued knock-on effect of the Ogden changes. However, current events could lead to further premium increases, with the financial hit insurers will be taking to their investment businesses.”
“The recent reduction of interest rates to 0.1% will also cause pressure on the bottom lines of insurers. This may manifest itself as increased insurance premiums in the coming weeks and months. Time will tell.”
“Existing customers will have their premiums locked in but new business and renewal customers during this period may feel the pinch.”
The technology factor is reflected in the uptake of ‘black box’ car insurance being up slightly in the past month. A fifth of the cheapest quotes now involve telematics policies, where drivers agree to install technology in their vehicles to monitor their driving skills in a bid to cut premium costs. However, take-up is still low in the older age groups, Consumer Intelligence found.
Just 3% of the top five cheapest car insurance quotes for the over-50s come from telematics brands. This rises slightly to 14% for 25-49 year-olds. It’s a different story for younger drivers aged under 25. Almost two-thirds (61%) of the cheapest quotes for these motorists are telematics products.
“Up until now, telematics has continued to keep generic premiums hikes at bay for the under 25s,” said Blevins. “However, under new lockdown conditions enforced to flatten the curve of the coronavirus outbreak, a number of insurers are hitting pause on offering telematics policies to new customers due to installation challenges. As a result, we could see the average premium for the under-25s rise over the coming weeks and months.”