Car insurance premiums have risen by an average of 13% in the last 12 months, according to the AA’s latest British Insurance Premium Index.
The average ‘shoparound’ cost of comprehensive cover is now £634, an increase of £73.42 since this time last year. The shoparound cost calculates an average premium by taking into account the five cheapest quotes for each customer.
Winners and losers
Drivers aged 17-22 are seen as a higher risk by insurers and therefore can expect to pay the highest premiums, at an average annual cost of £1,477. This figure has increased by 16.18% in the last year.
Some age groups saw their average premiums fall in the first quarter of 2017, with drivers aged 40-49 saving 1% and those aged 50-59 seeing a drop of 1.9% However, their premiums are still significantly higher than a year ago, with these age groups seeing a 12.8% and 14.7% increase respectively.
Those opting for third party, fire and theft cover have seen a shocking increase of 21.6% over 12 months. While you might expect this lower level of cover to be cheapest, it’s often more expensive so it’s important to consider all your options and compare all types of policy when shopping around.
Why are premiums rising?
Michael Lloyd, director of insurance at the AA, said the recent cut to the Ogden discount rate “has had an immediate effect on car insurance premiums.”
The discount rate is used to determine how much compensation is awarded to those seriously injured in car accidents. The rate was cut in March 2017, increasing costs to insurers — and these costs have now been passed on to customers.
Lloyd said: “It was an astonishing and unrealistic decision that didn’t take account of where claimants are most likely to save their money.”
The rate of insurance premium tax charged on policies has also increased in the past year, and it’s set to rise again in June 2017 to a rate of 12%.
Planned whiplash reforms, which aimed to cut the cost of false claims, were recently shelved in light of the upcoming election.
What can you do?
While the increasing costs affect drivers across the board, there are some measures you can take to ensure you get the right cover at the best price. Our guide 10 ways to cut the cost of your car insurance provides some tips.
One of the best ways to keep the cost of your insurance low is by shopping around rather than accepting your current insurer’s renewal price.
Compare with uSwitch today to see if you could get a better deal.