2nd January 2018 – Average motor insurance premiums have risen by almost £200 over the past five years, according to research by comparethemarket.com. Between September and November 2012, the average motor insurance premium stood at £559, but today premiums for the same three months have reached an average of £758 – a rise of £199.
Various factors have driven car insurance costs to accelerate over the past few years, including multiple rises to Insurance Premium Tax (IPT). Since March 2015, IPT has doubled to its current level of 12%.
The changes to the ‘Ogden’ rate, or Personal Injury Discount Rate, have also increased the cost of insurance for motorists. In February 2017, it was announced that the rate would be moved from 2.5% to -0.75%, meaning personal injury claims costs would increase, putting upwards pressure on premiums. After the changes were implemented in late March, premiums rose by £20. By November, average motor insurance prices had risen by £50 in only eight months. Despite this, the rate is expected change again, to somewhere in the 0% to 1% range, which should help take some pressure off premium inflation.
In addition to the impact of IPT and the uncertainty around the Ogden rate, premiums tend to be even higher in the later months of the year, meaning December’s average premium could be even more expensive, possibly exceeding the £800 mark.