UK motorists felt the impact of the rise in Insurance Premium Tax from 6% to 9.5% through higher private car comprehensive motor insurance premiums in the last quarter of 2015, according to the ABI’s latest Quarterly Motor Insurance Premium Tracker out today.
The Tracker, which is the only market indicator of what motorists actually pay for their motor insurance, shows that:
- In the last quarter of 2015, the average price paid for private car comprehensive motor insurance was £430, up 7% on the previous quarter. Excluding the IPT hike, the average price paid rose by 4% on the previous quarter, continuing the recent upward trend due to a rise in low value personal injury claims.
- The average premium paid rose by 8% in the year up to the end of December 2015.
Following Government reforms to reduce the legal costs in settling personal injury claims insurers have passed on over £1 billion in savings to customers in lower premiums.
However, the rise in the overall value of lower value personal injury claims, coupled with the Government’s rise in the rate of Insurance Premium Tax introduced last November, has led to rising average motor insurance premiums.
The activities of some claims management firms (CMCs) and claimant lawyers to generate new claims has contributed to the rise in lower value personal injury claims A staggering 83% of people say they have been cold-called by a CMC encouraging them to claim injury for personal injury or other financial loss according to ABI-commissioned research2...
Rob Cummings, the ABI’s Manager, General Insurance, said:
"Motorists have been hit by a double whammy of increased Insurance Premium Tax, and rogue claims management firms who encourage speculative and fraudulent claims.
"Motorists continue to shop around to get the best deal, but average motor insurance premiums will only fall once the cost of personal injury claims is properly tackled. We need to drive the cowboy claims management firms out of town, which is why the Government’s current review of the sector must result in tougher regulation. This, together with implementing further reforms to tackle frivolous claims such as increasing the small claims limit, will ensure that the brake is applied to higher motor premiums."
For more information see our industry data update.