Tax hike means car and home insurance to continue rising
The AA says premiums are on the up for the forseeable future.
Car and home insurance premiums are to keep on rising, according to the AA’s British Insurance Premium Index.
The Chancellor’s increase in Insurance Premium Tax, labelled a ‘stealth tax’ by some, is predicted to drive prices up further when it’s introduced in November, leaving insurers unable to pass on savings to policyholders.
AA's index is based on sets of 'shoparound' figures. Each set is calculated using the cheapest five quotes for each policyholder in a nationwide basket of risks, combining quotes from insurers, brokers and comparison sites.
Car insurance
Average motor premiums have jumped by 5.5% in the last 12 months. The quote for a typical comprehensive motor insurance policy has risen to £549.46, up 5.2% over the three months ending June 2015.
The worst affected age group are 23-29-year-olds, whose premiums jumped 6.2% to an average of £682.62, while the over 70s saw the lowest increase with a rise of 3.8% to £392.13.
Unsurprisingly, the youngest drivers (aged 17-22) are still being hit hard. Their average premium is currently at £1,241.81, up 4.4% over the past three months.
The IPT increase will add around £18 to the average car insurance policy.
AA’s Managing Director Janet Connor thinks this might encourage drivers to shop around to find a cheaper deal, possibly leading to introductory offers drying up as insurers “re-think their pricing”.
Higher premiums may also encourage people on low incomes to drive without cover, which could result in further premium increases.
A crackdown on nuisance calls and texts from claims management companies has seen a decrease in fraudulent claims, according to figures. These claims add an average of £50 on to each policy bought. The Association of British Insurers (ABI) recently found that as many as 350 fraudulent claims are picked up a day by insurers.
See if you can drive down your car insurance costs
Home insurance
The AA’s research reveals rises in both building and contents insurance for the first time since 2012.
Overall, prices rose by an average of 1.3%. The average quoted ‘Shoparound’ premium for a contents policy now stands at £61.18 (up by 77p) while buildings is at £108.15 (up £1.34).
Combined building and contents policy fell again by 62p to £152.27 over the three months ending 30th June 2015.
Even though they’re expected to rise, there have been falls across the board for home insurance. Over the past 12 months, premiums have fallen by 4.8% for buildings, 6.8% for contents and 6.4% for combined policies.
However, it’s thought that the insurance premium tax rise will add £5 on to the average household policy.
Insurance rates have been coming down further and further and with the IPT rise they’re expected to even out. Insurers are expecting their first underwriting loss since the floods of 2007 but this is due to competitive pressure rather than extreme weather.
That said, severe weather could lead to premium increases, particularly in the case of floods.
The Flood Re scheme, which aims to offer affordable premiums for people living in flood-risk areas, is set to be launched in 2016 and will put more pressure on premiums as the subsidised cost will be shared.
The AA’s Janet Connor says that extreme weather is most likely to affect rates, but that the weather over the last couple of years, barring 2014’s floods, will probably have no impact on them. “It will take a series of claims in excess of £1 billion to see a premium spike,” she said.
How to cut your home insurance costs
More on insurance:
Insurers expose 350 insurance fraud attempts a day
Healthbridge: cheaper private health insurance launched by CS Healthcare
Comments
Be the first to comment
Do you want to comment on this article? You need to be signed in for this feature