Car insurance prices 'falling at record rate'

Cars 'No-win, no-fee' cases are now more expensive to pursue

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The cost of car insurance is falling at a record rate in the UK, according to the insurance arm of the AA.

The average annual comprehensive car insurance quote fell to £594.84 this month, it said, down 9.8% from £659.53 last July - the biggest decrease since the AA insurance index began in 1994.

It said the dip was thanks, in part, to clampdowns on fraud and restrictions on claims management companies.

Despite the fall, premiums remain much higher than they were six years ago.

Third party, fire and theft quotes also fell between July 2012 and this month - down 4.8% to £820.58 on average, AA Insurance's research suggested.

BBC business correspondent Joe Lynam said the 9.8% fall in comprehensive cover quotes follows a 6.4% fall over the course of 2012 - itself a record.

But he adds that the cost of insuring the average car is still twice as much as it was in 2007.

Gender equality

At the start of April, a ban on referral fees was introduced.

Insurance premiums are far higher than they were in 2007

They were paid by lawyers and claims management firms to breakdown firms, brokers and the insurers themselves, in exchange for providing information about accident victims.

Also, anyone suing for accident damages with the help of a no-win, no-fee lawyer - known as a conditional fee arrangement - now has to pay their lawyer's success fee from their own funds if they win their case.

It was previously added to the bill of the losing party.

This has made claims more expensive to pursue.

And new gender equality laws have lowered premiums of men by far more than expected while women's premiums have remained static, according to AA Insurance's research.

Fraudulent claims - especially for whiplash which is often difficult to disprove - are also down.

AA Insurance director Simon Douglas said insurers previously faced "a fast-widening gap between premium income and claims costs - largely driven by whiplash injury claims and fraud, which saw very sharp premium increases between 2009 and 2011".

"That gap is closing and premiums are falling again thanks to competition, as well as improved fraud detection by the insurance industry and tightening of the law that is beginning to curb the number of spurious new whiplash injury claims," he said.

'Treated unfairly'

"The news that hundreds of rogue 'no-win no-fee' claims firms have been reined in is welcome and, in part, falling insurance premiums reflect that."

Graeme Trudgill of the British Insurance Brokers' Association said uninsured driving costs the industry £500m, whiplash claims £2bn and fraud £1bn.

But these costs were now coming down, he added, because of a concerted effort by the industry, with "discounts now feeding through to policy holders".

Justice minister Helen Grant said: "We are turning the tide on the compensation culture which has pushed up the cost of insurance for drivers, schools and business - and taking another important step to reducing the cost of living for ordinary people."

Earlier this month, City regulator the Financial Conduct Authority launched an investigation into insurance companies for overcharging customers when they renew their car and house policies.

The FCA says automatic renewal can lead to customers being treated unfairly.

BBC Radio 4's Money Box revealed in March that loyal customers often pay much more than new ones for insurance.

The insurance industry says consumers can shop around for the best prices in a competitive market.


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  • rate this

    Comment number 24.

    #1 Leaugefan: "Driving tests should be given to all motorists every 5 years and also for each type of vehicle they drive."

    Millions of drivers retested every 5 years and to what car they drive !!! Do you know how expensive and unpractical to reality that is? A Porche drives same way as a Mini just common sense is the difference.

  • rate this

    Comment number 23.

    How come if you own two cars you have to build up your NCD on them separately but if you claim then it affects both ?

    (I think I might know the answer; it's to shaft you).

  • rate this

    Comment number 22.

    17. The right to be able to drive should be universal not just for the wealthy.

  • rate this

    Comment number 21.

    We can be sure premiums won't come down as fast as they went up.

  • rate this

    Comment number 20.

    6. - Get a job, dude.

  • rate this

    Comment number 19.

    Car insurance should be change to be more like Motorbike insurance, as when you pass your bike test, are you limited to the BHP of a motorbilke for 2 years, giving use a chance to 'learn to dirve, when you pass your car test, you should be limited to the engine size and BHP, surely this would then help lower the cost of insurance espicially for younger drivers

  • rate this

    Comment number 18.

    My wife had a minor accident with the car when the wind blew the door open in a car park. The other owner was making a big fuss about his damage so I made an insurance claim.The preferred repairer was 30 miles away so I submitted 2 estimates locally. One was £190,2nd was £625.They insisted their guy got the job. Final bill £735.
    Why are insurance costs going up?
    Who is ripping who off?

  • rate this

    Comment number 17.

    @ 6. E Doyle

    Why is the government not subsiding insurance costs for those on income support?


    When you say 'the Government' you realise that the Gvt doesn't subsidise anything, right? The Gvt just makes decisions so that everyone else can subsidise - through tax. There are net contributors and net beneficiaries. I think folks should remember this when demanding the Gvt hand out cash.

  • rate this

    Comment number 16.

    Its time the insurance companies stopped fleecing their existing customers to subsidise discounted introductory policies. .

  • rate this

    Comment number 15.

    Industry just woken up to its prices forcing people to not insure and because of that not able to tax or MOT, nor legitimately buy cars.

    The government hasn't woken up at all and doesn't investigate it as the syndicated rip-off insurance it is or query why so many cars, so little revenue. However speeding, parking on lines and generally fine-able offences are rigourously policed.

  • rate this

    Comment number 14.

    We older men used to have about the same premium level as women. Probably the insurance companies recognised the lower testosterone level, therefore a bit less aggressive on the road.

  • rate this

    Comment number 13.

    It's not possible to infer anything about your own personal premiums from this report. They are talking about average premiums - so across tens of thousands of policyholders - there are so many variables your premium may go up or down.

  • rate this

    Comment number 12.

    I'm finding this report very hard to believe. My car insurance was renewed earlier this month with a very well known insurer and it went up (albeit) by £10, but it went up not down. I've made no claims and have no other restrictions causing the increase (59 plate car from new), so insurance hasn't gone down for me. The last time I actually paid less than the previous year was over 15 years ago!

  • rate this

    Comment number 11.

    Who put this piece of propaganda into the public domain?

    Insurrance companies forgot what insurrance is / was all about - namely, to SPREAD the risk - years ago.

    All they do now is REDUCE their risk.

  • rate this

    Comment number 10.

    @6. E Doyle

    Why should taxpayers subsidise those on income support? People need to take responsibility for themselves.

    And yep I was surprised by how much my insurance has fallen since last year - nice!

  • rate this

    Comment number 9.

    I am middle aged and pay around £200 fully comp, full no claims bonus with my wife as a named driver. I don't know where the average of £550 annual comes from unless you are a young driver. If I searched on comparison websites the highest I get is around £350.

  • rate this

    Comment number 8.

    I can't believe how much it's come down, I recently insured my group 50 car for just £440 mostly due to the drop in premiums for men I assume. But this equality nonsense must surely mean that ultimately you can't discriminate on age, accident record or anything else so insurance companies will have no variables to play with and one standard price for all.

    Complete nonsense in a free market!

  • rate this

    Comment number 7.

    #6. E Doyle
    Why is the government not subsiding insurance costs for those on income support?

    They are. It's called income support. You can spend it on whatever you want.

  • rate this

    Comment number 6.

    Why is the government not subsiding insurance costs for those on income support?

  • rate this

    Comment number 5.

    Last year there were record hikes in motor insurance costs due to an EU compliance about male/female differentials. My insurance rose over 10% even when using a companison site. So exactly what is excitment about?


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