The era of cheap cover for motorists has drawn to a close, as the AA reports consecutive quarterly rises in car insurance premiums to the end of 2014.
The average cost of annual car cover rose by 0.2% in the fourth quarter to £540.26, following a 1.2% increase in the third quarter ñ the first quarterly increase in 3 years. Premiums remain 10% down on the 12 months to the end of December, according to the AAís data.
Before July last year, premiums had been in free fall due in part to a sweeping onslaught on fake whiplash claimants, a crackdown on the number of complex third party bills which fleshed out premiums and industry-wide pricing pressures. However the AA reports that the trend is now bucked and car owners ought to be prepared for a gradual inclines in the cost of car cover.
Janet Connor, managing director of AA Insurance, said: “Some insurers may have lost business by increasing premiums, leading to a ‘year-end sale’ to boost market share, so car insurance is still very good value.”
But she added: “Nevertheless the underlying trend is upward, although I think premiums will struggle to rise past 10 per cent by the end of the year.”
Motorists can take some heart from the plummeting cost of petrol, with the AA reporting that petrol prices have fallen to their lowest level in 5 years, with a 7p monthly drop between December and January reflecting the plunge in the price of oil. With Saudi Arabia, the worldís number one oil exporter, showing no inclination to kerb its oil production, fuel prices in London could remain low for a lengthy period yet.
Whilst a number of insurers reduced their prices and introduced bargain package deals in expectation of the enactment of state-backed reforms aimed at decreasing the number of exaggerated personal injury claims, the reality is that claims are more common now than they were before these measures were implemented back in 2013.
The AA surmised that falling premiums between 2011 and last July were more conceivably due to competitive pressure within the industry than past state reforms, but Ms Connor reserved praise for the governmentís most recent proposals, which necessitate any individual to get a medical assessment in order to legitimise their claim.
Ms Connor said: “This would put off those looking for an easy cash win but would not discourage those with a genuine injury.”
Some within the industry met the AAís alleging of premiums being on the rise with scepticism. One such critic, Eamonn Flanagan, analyst at Shore Capital said:
ìThe latest AA Insurance index… makes for awkward reading for both the industry and for those pushing the motor insurance sub-sector higher since the start of the year on the back of an expected turn in the rating environment.
ìAccording to the AA Insurance, UK personal motor rates rose by just 0.2?% ?in the fourth quarter 2014, a slowdown compared to the 1.3% increase reported in the third quarter. This equates to around 1p per policy over the quarter and makes a mockery of the recent rally in share prices of the quoted motor insurers.î
On a side note, the AA also declared that home insurance premium, which have been slowly plateauing having spiralled downwards for roughly 4 years, will not fall much more. Currently 5.3% cheaper than they were a year ago, annual premiums have risen over the fourth quarter for 2014 by 5% to £163.06.