Car insurance premiums finally on the downhill

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Car insurance premiums finally on the downhill

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Car owners across the UK can breathe a sigh of relief as figures from the AA show that insurance premiums are on the decline.

Recent figures from the AA index, charting the quarterly movement of car insurance prices, highlight that premiums are now over 10 percent lower than a year ago, saving the typical driver almost £80 when it comes to renewal, according to Moneywise.

The average premium at £648.10, is a significant reduction from £726.93 this time last year, likely down to impending reforms aiming to reduce the amount of compensation paid out by insurance companies and curtail excessive numbers of whiplash claims.

Driving down car insurance premiums

Curtailing the whiplash compensation culture

Costing motorists more than £1 billion per year, the government’s plans to curb whiplash claims will see the end of ‘no win, no fee,’ claims for soft-tissue personal injuries under £5,000.

Insurers have long bemoaned the spiralling costs of spurious whiplash claims, fuelled by cold- calling firms promising drivers an easy payout or no fee for legal costs.

The most recent government figures, according to the Financial Times, show that the number of soft tissue injury claims rose to 780,000 in 2016-17 — the highest number four years.

Through raising the small claims threshold from £1000 to £5000 and introducing a stronger requirement for medical evidence, the government hopes to reduce the prevalence of fraudulent or exaggerated claims.

These impending reforms, as set out in the civil liability bill, first need to be approved by parliament before going into effect in 2020.

Speaking of the proposed reforms, David Gauke, UK justice secretary, said earlier this year:  “The number of whiplash claims has been too high for too long and is symptomatic of a wider compensation culture.

“We are putting this right through this important legislation, ensuring whiplash claims are no longer an easy payday.”

Changes to compensation for serious accident claims

Making the news last year, the government’s short-lived change to the ‘Ogden rate’, which is used to calculate compensation for serious accident claims, suffered a backlash from insurers.

Threatening a spike in premium costs due to increased payouts, the government reversed the rate change, which reportedly added £60 onto the cost of premiums.

The new rate is currently in review but is expected to cut insurance pay-outs for serious injury claims.

Speaking about the welcome reduction on car insurance premiums, Janet Connor, insurance director at the AA, says:

“Although not everyone will see premium falls of this size, it is certainly welcome news for many drivers. Premiums had been steadily driven upwards by the fast-growing whiplash claims epidemic, fuelled by unscrupulous cold-call law firms, as well as higher car repair costs.”

“Last year, the government said it was pushing through reforms to the claims culture with the Civil Liabilities Bill, as well as a review of the much-misunderstood ‘discount rate’ on payments made for serious injury that is likely to cut insurance pay-outs for serious injury claims. That has triggered a fall in premiums in the expectation that claims costs would fall.”

 

By | 2018-12-14T09:30:43+00:00 July 26th, 2018|Business, Personal Finance|Comments Off on Car insurance premiums finally on the downhill

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Felicity is a passionate advocate of simple living. Based in Scotland she was once a crime reporter, before moving on to obtain her degree in History. Felicity now focuses on business and financial journalism.