Experts predict that in the coming year UK drivers may have to pay up to a quarter more for car insurance.
Why is car insurance becoming even more expensive?
There are numerous reasons for rising premiums according to insurers. Firstly, insurance companies are being taken to court more than ever and payouts are rising. Other costs incurred by insurers are also rising. Although cars may be falling in price, more sophisticated designs mean that they are more expensive to repair. Insurers pay up to £3bn a year on vehicle components and spend another £3bn a year on car repairs.
Fraud is also a reason for higher premiums. Direct Line estimates that one in 20 drivers is uninsured and this is reflected in the premiums. In a fiercely competitive market, insurers are struggling to make a profit. Direct Line calculates for every £100 motor insurers gained in premiums, thy paid out £120. Also, the level of car crime in your postcode can negate any fall you expect to see in your insurance premium.
How competitive is the UK market?
The competition for customers is fierce, as consumers are more likely to change their car insurance than say their household insurer. The arrival onto the market of direct insurance providers such as Direct Line, in the 1990’s, shook up the market and put pressure on brokers. Many insurers cut premiums in order to compete with the direct insurers, but as their costs still remained high, they began to make losses. As a result, many are finding that they have to increase premiums to stay in business.
Is car insurance cheaper in Europe than the UK?
More drivers take out comprehensive insurance in the UK than mainland Europe, which means we do pay more in total for insurance. However, it is difficult to make a comparison, as it is difficult to compare like from like, so it is unclear whether premiums are higher than here than in Europe. Experts are of the opinion that the UK market is comparatively competitive and consumers here get a fair deal.
Will motor insurance premiums continue to rise?
In a nutshell, yes. The cost of car insurance is expected to rise in the short to medium term. Whether the competitiveness and low premiums of the early 90’s will return, remains to be seen but we may see lower premiums in the long term as insurers cut overheads by selling their policies over the internet and phone, well here’s hoping. As always, it pays to shop around, as there are great deals available due to a competitive market.