Motorists in the UK could be in for a bit of a shock when their car insurance renewal letter lands on the doorstep this year.
New figures from the Association of British Insurers (ABI) show that the cost of insuring a car in the UK is now at its highest level, with the average annual premium now costing £481 – an increase of 9% on last year.
A separate study by the AA this week backed up the ABI’s findings and suggested that the average premium is actually higher at £666 per year – a 2% increase.
The ABI’s figures relate to the last quarter of 2017, the months October, November and December, which was the eighth quarter in a row where car insurance premiums had increased. The AA has warned that premiums will continue to rise this year.
The slight difference in the cost between the two reports is because the AA compares prices quoted while the ABI looks at what people actually pay.
One thing is clear from the two reports though: most of us will be paying more for car insurance in 2018 than ever before.
Unsurprisingly, the AA says that young drivers aged between 17 and 22 face the highest premiums with an average annual price of £1,625. Young men still pay more than young women, which is driven by the differences in first car choice, mileage and occupation.
Drivers in the North West pay the most, with the average quoted premium price of £916. Northern Ireland isn’t far behind with £885, with London a close third with an average annual premium of £833.
Why does car insurance keep getting more expensive?
The insurance industry puts most of the blame on a series of increases to Insurance Premium Tax, which has been subject to several rises over the last few years and now stands at 12%.
The government’s changes to the so-called ‘Ogden’ discount rate – which influences how much compensation insurance companies have to pay for injuries – have also been cited as a reason for higher insurance premiums. As well as that, the Ministry of Justice has also announced a series of reforms to small claims (i.e. whiplash) in an attempt to reduce fraud.
Releasing the new figures, the ABI’s assistance director Rob Cummings said:
The rising cost of motor insurance shows no sign of abating.
Changes to how compensation payouts are calculated, insurance premium tax, more whiplash-style claims and rising repair bills, are all piling on the pressure for cash-strapped drivers.
The government must urgently bring forward relief for motorists. It is time cash-strapped motorists got a break.