It has just been announced by the Association of British Insurers that car insurance premiums have continued to rise for 8 consecutive quarters and are now at the highest level since recording began in 2012. The figures for commercial vehicles are worse.

Why are car insurance premiums going up?


Duncan Sutcliffe, director, Sutcliffe & Co Insurance Brokers, explains the answer can be blamed on a number of reasons:
Insurance Premium Tax (IPT): the tax on most insurance products increased from 6% to 9.5% in 2015, then to 10% in 2016 and most recently to 12% in June 2017. This tax increase went widely unreported but is clearly a factor that will lead to increased premiums.

The Ogden Rate: in simple terms this is used to calculate the compensation paid to people injured in accidents. The Chancellor amended this rate in 2017 which has resulted in a jump in the amount insurance companies must pay for injury claims. As an example, the insurance company Allianz calculated that a life changing injury to a 30 year old earning £25,000 a year would see the compensation award increase from £2.8m to £6.3m. Understandably this has forced insurers to increase premiums to cover the higher cost of claims.

Car repair costs: cars are undoubtedly safer than they used to be but the complexity of their construction and components means that what were once simple repairs can now be expensive and time consuming.

Fraudulent claims: there continues to be a rise in exaggerated, and fraudulent claims, including deliberate accidents and lots of people are making money from this. Aviva has shown that in recent years there have been 30% less accidents but 62% more injury claims, especially whiplash. Aviva estimate that the epidemic of whiplash claims adds £93 onto every car policy. They point out that in France just 3% of injury claims involve whiplash but 80% in the UK, which might explain why the French pay 40% less for their car insurance.

Sexual equality: in 2012 it was made illegal to charge different premiums for men and women, despite the fact that statistically men have more expensive claims, this saw premiums for Women increase by about £100.”

How to reduce car insurance premiums?

Duncan explains:
Type of car: expensive vehicles and vehicles with powerful engines cost more to insure and there are fewer companies willing to insure them. This is especially true with younger drivers. You might be able to afford to buy a car with a large engine but can you also afford the additional cost of the insurance?

“xTelematics / Black Box: an increasing number of insurance companies are using technology to reduce the cost of insurance, especially for younger drivers. The insurance company can use telematics to track how the vehicle is driven and reward good drivers with lower premiums, and penalise those who drive recklessly. They can also report driving details back to parents!

Add a driver: if you have a family member or friend who may occasionally need to drive your car consider adding them to your insurance policy, in many cases this can reduce your premium, especially if the other driver is mature with a good driving record. However, don’t add lots of people as this can put the cost up.

Protect your No Claims Discount (NCD): For every year you drive without a claim you can earn a NCD which will reduce the cost of your insurance, sometimes by as much as 70%. But if you have a claim this can remove the NCD thereby increasing the cost of your insurance. Many insurance companies will allow you to protect this NCD for a small payment.

Better security: it can be possible to obtain savings if you have a tracker or immobiliser or if your car is kept in a garage. Beware, some insurance companies will not cover your claim if you say your car is garaged overnight but on the night of the claim it is not.

Reduced mileage: many insurers will give you about 12,000 miles annual use as standard, but this may be far more than you need.

Cameras: not many insurance companies give discounts to private cars if they have cameras but in the event of a claim the footage can significantly reduce the cost of a claim, therefore keeping your claims history healthy; the camera can also prove your innocence in fraudulent or disputed claims. Commercial vehicle insurance policies are more likely to give discounts if you have cameras fitted.

Comprehensive cover: You may be tempted to reduce your cover to Third Party in the belief that this is cheaper, this is often not the case, get a quote for Comprehensive cover and you might be pleasantly surprised.

Increased excess: If you increase the excess on your policy it will generally reduce the premium, which is worth considering, however, make sure you fully understand what the total excess is that you will be expected to pay.

Comparison Sites, Direct or Broker: There are lots of ways to buy car insurance but beware the differences and do not assume one route is automatically cheaper than the other. Comparison sites have been accused of hiding details, additional costs and onerous conditions from buyers, they can also encourage you to buy on price alone, without consideration to quality or suitability of cover.”

For more information on any of our news articles, please contact:

Duncan Sutcliffe

01905 21681

[email protected]

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Dermott Quinn, Managing Director Ductbusters Ltd

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"I highly recommend the Sutcliffe & Co team both for their proactive ongoing annual renewal work & also for helping during a recent claim. Its great to know we have a local firm with people we can rely on."

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“We had been with our current broker for several years and had become complacent. An increase in premiums led us to want to cross check with an alternative broker and we chose Sutcliffe. We found them a breath of fresh air; there was a transparency in our dealings, their advice gave us options and they found competitive ways of providing insurance from high quality companies."

Chris Oliver, Director, CHANE Investments Ltd

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Sophie Talbot, Partner, Talbot Transport

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“I was thrilled when I found Sutcliffe & Co, friendly, efficient and with competative prices. Their expert advisor really helped me through the insurance minefield and he went that extra mile that other companies just did not...."

Michelle Davies, Office Manager, Davies and Daughters Building Contractors

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"May I congratulate you and your staff for the attention to detail and the service that you have given to Ductbusters over the years. We searched for a long time for an Insurance Broker that had the professionalism to resource the many and varied insurances we required and you have never failed ourselves."

Anthony Eddies-Davies, Director, Live The Adventure Ltd

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