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Car insurance costs fall as fears over payout changes subside

 

The average cost of car insurance has tumbled by more than a 10th over the past year, as fears subsided about potentially huge increases in payouts after car crashes.

Insurers raised premiums sharply in 2017, partly blaming changes to the “Ogden rate”, which is used to calculate compensation awards for serious personal injuries.

The average car insurance premium rose to £847 in the second quarter of 2017 but has since dropped back to £752, according to comparison website Confused.com.

“The end is in sight for the rollercoaster that has been car insurance, which has blighted drivers with accelerated prices. Car insurance is now £752 and a whopping £95 (11%) cheaper than it was 12 months ago, putting the true impact of the Ogden rate discount into perspective,” said Confused.com

When changes to the Ogden rate were first mooted in early 2017, it prompted a furious backlash from insurers, who said it would land them with a multibillion-pound bill. Critics also said the NHS would face a £1bn increase in payouts, following botched operations.

But intense lobbying by the insurance industry, which called the changes “reckless in the extreme”, prompted a U-turn by ministers and a revised formula for payouts.

“Insurers seem to have recovered from the shock of this dramatic change and have been able to soften their prices,” said Confused.com.

But car insurance premiums were already rising steeply before the Ogden rate change. Despite the 11% fall over the year, they remain significantly higher than the lows of 2008.

Confused.com added: “Prices are still £37 more expensive than two years ago and £74 pricier than half a decade ago. And prices will need to drop by £253 before drivers benefit from the rock-bottom premiums of 2008 (Q2), when car insurance cost just £499, on average.”

The company says its figures are the most comprehensive in the UK, based on more than 6m quotes generated by the site every quarter.

The price paid by men for car insurance remains significantly higher than women, despite an EU gender equality directive that came into force in 2012, banning gender discrimination.

On average, men pay £92 more than women, although the gap has closed slightly since the previous quarter when it was £95. Insurers said that while they no longer discriminate on gender, men tend to drive more expensive cars with larger engines and make higher-value claims. They also tend to have significantly more motoring convictions than women.

Young people have enjoyed the biggest fall in car insurance premiums over the past year, largely due to the popularity of “telematics”, which enable insurers to check on a driver’s speed patterns, braking, the type of roads they drive on and what time they drive.

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