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Prices dropping but still higher than 2016

Premiums show signs of reduction despite a year-on-year increase

AA BIPI April 2017

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The cost of car insurance cover has increased since this time last year, but prices show signs of dropping, according to the latest British Insurance Premium Index from the AA.

The Index measures ‘shoparound’ price of car insurance — the average of the five cheapest quotes for a customer across brokers, price comparison websites and insurers.

The average shoparound quote for comprehensive cover is now £680, £60 higher than this time last year after an increase of 9.7%.

“A small step in the right direction”

Despite premiums costing more than this time in 2016, the index reveals an average cost reduction of £35 for comprehensive policies over the last three months, the biggest quarterly drop since 2014.

The cost of third party, fire and theft cover has dropped even further over three months, falling by 9%. However, these policies are typically significantly more expensive, with the average shoparound quote costing £879.

Michael Lloyd, director of AA Insurance, said: “This is certainly a small step in the right direction.”

Longer-term price rises

Lloyd continued: “Drivers have had to put up with some sharp premium increases over the past three years, in part due to avoidable government intervention.”

Three years ago, in the last quarter of 2014, the average quote was £531 — and prices have risen by a staggering 28.3% since that time.

Over that period, many factors have contributed to rising prices, including changes to the Ogden discount rate as well as increases to Insurance Premium Tax (IPT).

There are concerns that the government could increase the rate of IPT further in the upcoming budget on November 22, despite the rate previously doubling over an 18-month period.

While prices have shown signs of falling in the last three months, the annual increase means drivers are likely to see an increase on last year’s premiums when it comes to renewal time.

Find out if you could beat your renewal quote by shopping around with uSwitch below:

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