CAR INSURANCE PREMIUMS HAVE RISEN 12 TIMES FASTER THAN INFLATION IN THE PAST TWO YEARS

  • Annual rate of growth for motor insurance premiums averages 12.8% over the past two years
  • Average Consumer Pricing and Housing Index (CPIH) rate stood at 1.1% during the same period
  • Rate of car insurance premium growth has slowed to 5.9% in May 2017

12 July 2017 – Car insurance premiums have risen over 12 times faster than the average rate of inflation over the past two years, according to analysis by comparethemarket.com.

The latest Premium Drivers Index shows that the annual rate of growth for motor insurance premiums has averaged 12.8% over the past two years, compared to the average Consumer Pricing and Housing Index (CPIH) rate of 1.1%, highlighting the spiralling cost of driving.

The rising car insurance premiums can be attributed to a wide range of factors, including recent changes to Insurance Premium Tax, which has been doubled over the past two years. The tax, after the most recent hike was implemented on 1 June, now equates to 12% of insurance premiums.

The changes to the way in which personal injury compensation is calculated, otherwise known as the Ogden rate, has also been a major contributing factor to the growth of premiums this year. In February, the Government announced that the personal injury discount rate would be changed to -0.75%, which has forced insurers to raise premiums.

In May 2017, the annual growth rate for car insurance premiums was 5.9%, while inflation was almost half this figure at 2.7%, highlighting that, while growth has somewhat slowed, premiums are still rising significantly faster than inflation.

The latest Premium Drivers Index also shows that the difference between the average and cheapest premiums – the average saving – is almost at record levels. The average saving is currently £126, just £2 below the record figure found in the last Premium Drivers report in March, highlighting the benefits available to those who switch motor insurance provider.

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Simon McCulloch

Director

comparethemarket.com

“The past two years have been characterised by non-stop cost pressures on British drivers, who still face ever increasing premiums. The past year alone has seen premiums jump by more than £50, as changes to Insurance Premium Tax and the ‘Ogden’ rate have hit the pockets of motorists. The rate of growth has slowed in recent months, which is a positive step, but the rising cost of premiums continues to significantly beat inflation. It is now more important than ever to shop around for the best insurance deal to mitigate these sustained hikes in insurance costs, as hundreds of pounds can still be saved by switching providers."

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