RAC Cars News


Car Insurance Premiums Going Up

By raccars Published

Source: www.CheapFullCoverageAutoInsurance.com

New research has revealed that after three years of lower car insurance prices, premiums are now on the rise. The latest budget is also expected to adversely affect insurance premiums, adding an estimated £18 to the average comprehensive policy price.

At the end of June and the second quarter of the year, the average comprehensive insurance premium had risen by 5.2% or £27.34 to £549.46, after sitting at about £520 for most of the previous year. This is the first significant increase in prices since the end of 2011. Younger drivers are coming off worst, with the average premium for a 23-29 year old going up by 6.2%, to £682.62. However for drivers of 70 and older, price increases were slower, going up by 3.8%, to £392.13 on average.

Price increases also demonstrated a geographical bias, with residents of the West Country, Tyne Tees and the Borders seeing the greatest price increase in the second quarter of the year, at 6.4%, compared to only 3.9% for Welsh car owners. The last three months saw Scottish car owners paying 4.4% more for their insurance, on average.

Premiums are at their highest in the north-west, with the average quote for comprehensive cover at £795.05, and at their lowest in Scotland, where the average comprehensive premium is quoted at £381.87.

The trend for lower insurance premiums in the last three years was attributed to stricter laws against fraudulent personal injury claims, which it is estimated had added about £50 to every car insurance policy. Insurers had cut prices as far as possible in order to remain in an increasingly competitive market, a policy which has proved unsustainable in the long term. After the Chancellor's summer budget increased the tax on insurance premiums from 6% to 9.5% from this November, insurers did warn that they would be forced to raise premiums to cover the extra costs.

About £18 will be added to the average comprehensive insurance policy, to cover the new rate of tax. With insurance premiums already expected to increase, the extra tax will make that rise much sharper, as insurers are not in good enough shape to absorb the cost themselves.

With insurers rethinking price strategies, they are also likely to cut back on the tempting introductory price discounts used to attract new customers, at a time when insurance premiums for buildings and contents are also rising and leaving home and car owners struggling.

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