Car insurance prices fall – but they’re still above 12 months ago

  • MoneySuperMarket’s latest data puts the typical cost of a comprehensive automobile insurance policy at £485
  • This is a forty-five fall compared to the last three months of 2019, but still 1% above 12 months ago
  • The latest data shows that April premiums are at their lowest level for five years at £462, suggesting reduced vehicle usage during Covid-19 lockdown leads to fewer accident claims

Average automobile insurance premiums fell by £18 during the primary three months of 2020, consistent with the newest data from MoneySuperMarket – putting the standard cost of an annual premium at £485.

However, with the tail-end of 2019 seeing a comparatively sharp hike in automobile insurance costs, premiums are still £5 costlier compared with 12 months ago.

The rise in average premiums during the half-moon of 2019 was largely thanks to insurers’ responses to the reduction within the so-called ‘discount rate’ – a figure applied to high-value personal injury automobile insurance claims.

 

 

The rise in average premiums during the half-moon of 2019 was largely thanks to insurers’ responses to the reduction within the so-called ‘discount rate’ – a figure applied to high-value personal injury automobile insurance claims.

The discount rate in England was reduced last summer by the Ministry of Justice from -0.75 to -0.25 meaning insurers had to line aside additional cash for those seriously injured during a car accident – and insurers responded by hiking premiums.

MoneySuperMarket’s previous automobile insurance Premium Monitor showed a 6.56% rise in average costs within the three months to December 2019.

The rise may are compounded by the UK’s impending departure from the ECU Union, which went ahead on 31 January 2020.

 

Fewer claims during Covid-19 lockdown means insurers might be forced to scale back costs. Admiral Group has already announced its customers will receive an automatic £25 refund on their premiums.

MoneySuperMarket’s most up-to-date Q1 figures, showing a discount on premiums, suggests that insurer may now have factored within the full impact of changes to the discount rate. However, the effect of Covid-19 on both how we use our cars during lockdown – also as how the economy will emerge the opposite side – is now likely to eclipse all other internal and external factors affecting automobile insurance premiums. For example, insurers could also be forced to scale back costs as they’re going to be paying out fewer claims as a result of people driving less (or not at all) during the Covid-19 lockdown.

Some insurers are already making goodwill gestures to the present effect. On Tuesday (21 April), Admiral Group Insurers – which incorporates Admiral, Bell, Diamond, and Elephant brands – announced that each one their car and van insurance customers will receive an automatic £25 refund on their premiums.

The rebate is going to be applied automatically by the top of May (so long because the policy was in place as of 20 April 2020) consistent with the insurer group. As lockdown continues, other car insurers could also be morally pressured to follow Admiral’s lead.

It’s also worth noting that within the US, two major car insurers (Allstate and American Family Insurers) have pledged to return a collective $800m in premiums back to their customers, either as one-off payments or an automatically applied discount in monthly payments. The UK went into full lockdown on 23 March so any effect on premiums won’t be reflected in our Q1 data which runs to 31 March 2020. It remains to be seen how insurers will price premiums within the next quarter and beyond. Even when lockdown lifts, journeys made by road could take weeks or months to return to pre-COVID-19 levels.

The trend for declining prices in 2020 has continued with average premiums in April 2020 now at £462 – rock bottom price since March 2015 In the even longer run, increasingly sophisticated technology used on today’s cars (such as autonomous emergency braking) and telematics policies which encourage safer driving should end in a discount in accidents exerting further downward pressure on premiums.

That said, the more advanced technology onboard a car, the costlier the repairs if it’s damaged (because parts are expensive and qualified mechanics could also be briefly supplied).

While we’re undoubtedly heading for a long-term way forward for fully automated cars, fewer accidents and lower premiums – movements in premiums within the short and medium-term, are likely be governed by Covid-19 and therefore the impact it’s on when, why and the way often we
drive.

 

Digital Risk for UK Insurance Infographic

Our study of digitization within the UK motor insurance sector by LexisNexis Risk Solutions found that only 18% of the insurers surveyed believe the industry is ‘fully prepared’ to manage digital risks. This figure drops to 14% for those that regard their own organization as being ‘very prepared’.

In the research, motor insurers were asked to call which risks they saw as most challenging. Email security and data protection, also as identify theft, topped the list for insurer concerns at 35%, followed by cybercrime at 27%, connected technology, and social networks at 26% and therefore the spread of malware at 16%.

These responses reflect the large volume of online quotes and transactions during this sector of the market. With this, comes the constant threat of fraud, highlighting the importance of knowledge used for accurate verification at point of the quote also as industry concerns over the protection of private and behavioral data through connected technology.

The core of providing value for consumers is transparency and good data management practices. Insurance providers should be working with partners who are experienced within the applicability to process personal data disclosure and data quality management with minimal risk.

Overall our report has highlighted the importance of designing for digital risk and therefore the got to make sure that future offerings are robust and agile enough to affect a variety of threats, if or once they strike. At LexisNexis Risk Solutions, we are ready to help insurers manage and minimize risk through best practice protocols for data analytics and best-in-class security standards.

Highlights of the research are shown within the infographic below. For more insights from the survey, download the LexisNexis Risk Solutions white book ‘UK Motor Insurance Insights: Managing the Challenge of Digital Risk’.