Whenever the AA Insurance Premium Index is about to get published, you can cut the anticipation in the air at Covered Towers with a knife.
Well, that may be stretching the point a bit. But it makes for interesting reading nonetheless. And this quarter’s dose of car insurance-related fact fun is no exception. It turns out that car insurance prices are actually falling. Yes, really.
The AA’s Shoparound index – that’s an average of the cheapest five premiums from directly sold policies for each ‘customer' in a nationwide ‘basket’ of risks, formula fans – found that in the last quarter the average quoted cost for an annual comprehensive car insurance policy fell by 2.9% to £844. But over that last 12 months, quotes have risen by 5.6%, so it’s not all good news.
Using the same Shoparound basket of risks on price comparison sites suggests that the average premium has fallen by 1.0% to £612; a drop over 12 months of 2.3%.
Simon Douglas, director of AA Insurance, says that this is good news for customers although the averages mask wide premium extremes. "Competition is tough in the insurance market, forcing many companies to reduce premiums despite the fact that costs show little sign of abating. Nevertheless, some are still increasing premiums."
There’s a crumb of good news for younger drivers (aged between 17-22), with premiums falling slightly, following sustained increases over the past two years which reflect the growing cost of claims involving young drivers, especially young men.
The European gender directive law is finally beginning to make itself known too, by the seem of it. "Over coming weeks, most insurers will introduce gender-neutral pricing ahead of the deadline. This will affect young female drivers most, who could see premiums rise by as much as 25%,” says AA’s Simon Douglas. “Insurers are likely to be cautious initially because they won't know what mix of business they'll write after the change. They will want to avoid writing young male business at unprofitable rates, but competitive pressure will lead to premiums settling down in time. That is likely to take very many months.”