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.