The latest AA British Insurance Premium Index shows the biggest annual drop in premiums since the Index started in 1994.
According to this quarterly benchmark study, the average Shoparound quote for an annual comprehensive car insurance policy fell by £568.32 and 12.4% over the 12 months ending 30 September.
The Shoparound quoted premium is an average of the five cheapest quotes for each ‘customer’ in a nationwide basket of risks that is representative of the national car insurance buying public.
After a period of sustained premium increases which saw premiums increase by more than 40% just two years ago, premiums have been falling at an increasing rate over the past year.
Simon Douglas, director of AA Insurance, says that the car insurance market has become intensely competitive.
“These drops are dramatic and many insurers are reducing rates based on anticipated savings from new measures in the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) 2012.”
“The insurance industry is working hard with enforcement agencies to bring those attempting to make fraudulent injury claims to book. Indeed, there have been some recent widely-publicised arrests of criminal gangs deliberately causing crashes through ‘crash for cash’ and its new variation, ‘flash for cash’ scams in order to cash in on insurers by making false whiplash injury claims against innocent motorists.
“Honest motorists have been putting up with their premiums being affected by false or exaggerated injury claims for far too long.
“There has been a lot of talking and investigation into the car insurance market. Now premiums are reflecting anticipated law changes.”
The new measures announced today by Government are expected to bring further falls.
Douglas added: “Without these further reforms to deal with excessive whiplash claims, the reductions we’ve seen can’t justified by changes in the cost of claims.
“While competition may continue to force rates down for a while, without further reforms there would be a risk that there will be another sudden reversal once insurer losses start to bite.
“So these measures to contain the cost of claims are to be welcomed as ultimately that is what drives premiums.”
In a separate move, next year insurers will be able to obtain driver data direct from the DVLA and most insurers are expected to start asking drivers for their driver number (off their driving license). This will help to stamp out false declarations of driving experience and driving convictions for example; bringing savings of around £15 on the cost of a typical car insurance policy.