‘Pre-Covid-19’ price index shows uncertainty in car insurance costs, say Confused.com and Willis Towers Watson

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The latest Confused.com and Willis Towers Watson Car Insurance Price Index shows that comprehensive car insurance premiums fell 1% (£6) in the first quarter of 2020, disguising an underlying, gradually increasing trend that reflects inflationary and one-off cost pressures.

The average cost of car insurance is now £809, following a £47 (6%) increase over the past year, according to the car insurance price index based on data compiled from almost six million customer quotes per quarter.

Graham Wright of Willis Towers Watson said: “Premium levels for the first quarter have continued to fluctuate monthly with little evidence of an emerging overall trend, which reflects the uncertainties faced by the market and the challenge of balancing conflicting future trends.”

Confused.com and Willis Towers Watson noted that data and trends from the latest car insurance price index should be treated as ‘pre-Covid-19’, as quotes sought during the UK’s lockdown period commencing late in March were not available in sufficient volumes.

A special, one-off index release is planned in a few weeks time, which will consider the impact of the lockdown on quoting behaviours and price trends.

Wright said: “The index data represents a largely pre-Covid period and does not yet give insights into the market’s pricing response to Covid-19, although there is widespread recognition of claim frequency reductions whilst lockdown measures persist and acknowledgement that these may be offset to some degree by severity increases, all of which adds to the uncertainty in the market.”

Drivers in Central and North Wales benefited from the greatest quarterly drop in prices, with their insurance premiums decreasing 3% (£22) to £637 on average. The Scottish Borders and the East Midlands were the two regions in the UK to experience the largest rise in the cost of comprehensive car insurance, with premiums increasing 2% (£10) and 1% (£11), respectively. 

Local data shows that drivers in Salisbury benefited from the greatest quarterly fall of 12% (£82), reducing the premiums of drivers in this area to £600. Drivers in the City of London experienced the sharpest rise of 19% (£218), where drivers were paying an average of £1,389 in the last three months.

Male drivers aged 71 or over benefited from the greatest price fall, compared to other age groups, seeing a 4% (£20) quarterly price decrease, taking their annual premiums to £525. Meanwhile, male drivers aged between 26 and 30 experienced the largest price rise of 1% (£8), taking their annual premiums to £1,093.

Wright said: “Notwithstanding the specific impacts of Covid-19 on driving behaviours, the current situation makes future prediction of claims inflation, the timing of the Civil Liabilities Bill implementation and the impact on future reinsurance costs all the more challenging. Given the unprecedented nature of the crisis, we will be aiming to publish an interim index during Q2 to provide an update to the market.”

Steve Fletcher of Confused.com said: “If there’s one thing we know for certain it’s that insurers don’t like uncertainty. There is evidence to suggest that it will be a while before prices calm down and that they will continue on the upward trajectory we’ve seen over the past year and a half.”

“While we don’t expect insurers to introduce discounts to account for fewer miles being driven, people are looking to make savings at this financially challenging time. The winners will be the insurers that listen to customer needs and simultaneously react to market movements. Societal uncertainty means insurers will need to closely follow this situation as it unfolds.”

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Mark Dugdale is the editor of Claims Media. Mark welcomes articles, letters or feedback from readers and can be reached via mark.dugdale@barkerbrooks.co.uk