by Steve Green, director at Anthony Jones Insurance Broker
I’ve been reading reports which suggest motor insurance premiums have hit a record high. This doesn’t just affect private vehicle owners but also businesses who buy motor and liability insurance.
The issue isn’t going away. There are a number of factors likely to come into play which could see these premium increases continue for the foreseeable future.
As vehicles become more technology dependent, the ABI reports that the average repair cost has increased 32% over the past three years due to the complexity of repairs. This is compounded further by the increased cost of spare parts because of the current weakness of the pound.
A factor in insurance premiums rarely talked about is the discount rate (also known as the Ogden rate). When a person is paid a large sum of compensation following an accident, an adjustment is made to the compensation amount that an insurer will pay. This is based on how much extra income the recipient is likely to receive when they invest the compensation.
The discount rate is set at 2.5% but has recently come under review by the Lord Chancellor. The likelihood is that this rate will be reviewed down. If this does go ahead (an announcement is due shortly) it, unfortunately, spells more bad news for insurance premiums as it will mean insurers must pay out more money in compensation claims. As personal injury claim costs increase, so, too, do premiums.
Add to all of this the rise in Insurance Premium Tax (IPT) announced in the autumn statement that will see it hit 12% from June and increasing whiplash claim costs, it doesn’t seem there is much in the way of positive news for insurance premiums at present.
In this environment, it is more important than ever that your chosen broker understands how risk is managed and can use this information positively in the insurance market. Next time you contact your broker make sure you allow time for a proper conversation. They need to know your business inside out. If you feel this isn’t the case or if you’re not happy for some reason you might want to consider taking your business elsewhere.