Research by AA Insurance has revealed that car insurance premiums declined during the third quarter. After years of significant increases in rates, prices were flat during the first six months of this year and have started to drop. The least expensive comprehensive policies directly purchased from insurers fell 2.9% to an average £870 per year. Policies bought indirectly through price comparison websites also dropped 1% to £612 per year. This decline has meant that directly buying car insurance from an insurer still costs 6% more than a year ago, while cover bought via price comparison sites is slightly cheaper in comparison.
In the next few months, the car insurance industry will go through two major changes. Insurance providers won’t be able to offer cheaper premiums to woman drivers as of 21 December after the European Court of Justice ruled that providers can no longer base their premiums on the gender of the policyholder. This will affect annuity costs as well. Insurance companies have warned female motorists – especially young ladies – that their premiums will probably rise 25%, which will bring them in line with male drivers. It’s even been suggested by some that premiums for women could rise by more – up to 50% – and that some providers could stop offering cover to young motorists altogether.
The second major change for the industry will come in April, when legislation will ban an activity that has helped boost premiums over the last ten years. The acceptance of referral fees – selling information about accident victims to no-fee, no-win law firms or claims management firms – will be illegal for personal injury claims. Additionally, anybody suing for damages in an accident with the help of no-fee, no-win law firms will have to pay their lawyer’s success fee with their own funds if their case is won. They won’t be able to add the cost onto the losing side. This is an attempt to make claims too expensive to pursue, leading to a reduction in claims altogether.
Meanwhile, the government is planning to consult on how to reduce the number of whiplash injury claims and their costs. Insurance firms have determined these are one of the main reasons insurance premiums are rising so fast. They argue that the claims are fake in many cases, or too hard to contest under current regulations. Any changes could include increasing the small claims limit for personal injuries to £5,000 so more claims go to county courts. Independent medical panels may also be brought in to decide if a claim is genuine or fraudulent.
AA Insurance director Simon Douglas says that tough competition for business is putting pressure on insurance costs. This comes despite claims costing more and more. This is forcing many insurers to cut their premiums, even though expenses show little sign of reducing, while some rates are still rising. Car insurance has been one of the government’s focuses for some time. Next year, new legal changes are due to cut personal injury claims costs and fraud. Whiplash injury claims are still increasing, and they are hard for insurers to get rid of under current legislation. They are difficult to reject even if insurers think they could be fraudulent, as it’s hard to prove if the claimant suffered an injury or not.