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40% increase in cost of car insurance for year to end March 201113 April 2011by Eleanor Morris The AA's Insurance Price Index (IPI), that analyses car insurance prices every quarter, has revealed a huge increase in the price of car insurance over the last twelve months. The price of a motor policy has jumped by 40% since the begining of April 2010 to the end of March 2011. The IPI checks quotes from over 50 car insurance providers then takes the average of the cheapest three quotes to determine the current 'shop around' price. The typical price of a policy calculated by this method is now £892. Young drivers aged 17-22 saw an increase in the cost of their cover by a staggering 64% over the period. The recent huge hikes in the cost of car insurance prompted an enquiry by the Department for Transport and the recommendations of that enquiry are reviewed here: Transport Committee Report on the Cost of Motor Insurance. We have also looked at the causes of these car insurance price increases and our findings are summarised here: The 15 causes of rising car insurance prices. That the Government is about to implement the main Jackson Report recommendations will help to reduce the inflationary pressures on the cost of car insurance in due course, but for now prices are set to continue to rise further as insurance companies adjust pricing to return a profit after recent loss-making years. As prices rise, the majority reduce their level of cover in order to avoid paying the full increase. Fifty-seven per cent in the year 2009-2010 did so. However, as BIBA has warned, the risks of doing this are significant as cheap policies can result in the consumer paying much more himself in a claim. If anything, the picture has got even worse for hard-pressed motorists as 63% continue to prioritise cheap car insurance over quality cover. Those that are especially hard hit by the increase are young drivers. Many have been tempted not to declare past claims or penalty points while still more are willing to let an older person, usually a parent, 'front' their policy. As we've explained in our buyers' guide, none of these are likely to pass unrecognised any longer and the young driver will not serve himself well by presenting a fraudulent insurance application. There are ways for young people to reduce the cost of their car insurance and these are also fully presented in our buyers' guide section. One particularly useful development has been for telematics to have become more widely available recenlty such that it is a practical option for young drivers willing to save money via a safer driving style. While price comparison sites are a good way to cut costs, our own evidence suggests that people cut corners when using these systems by allowing a low price to trump policy considerations. The risk of doing this is that the consumer buys limited cover that fails to deliver an optimal outcome in an accident. This is easily avoided by taking the time to look over policy features before buying a car insurance policy. Use of the insurance resources presented below should help to reduce costs for hard-pressed motorists. Comment: Increasing cost of car insurance - Will it continue? |
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