Cost of car insurance hits record high
Drivers are paying record amounts for their car insurance, with average premiums up 11% in the last year, the Association of British Insurers (ABI) has said.
The average price paid for comprehensive motor insurance rose to £484 for the second quarter of 2017 - up £48 from the same period last year, figures show.
There was also a 4.8% increase (£22) on the first quarter of this year, when average premiums were £462, according to the ABI Motor Premium Tracker’s most recent figures.
The ABI said the increase is the biggest year-on-year rise since it started tracking premiums in 2012, while month-by-month figures show average premiums rising to £498 in June.
The spike follows a decision announced by the Government in February to cut the personal injury discount rate, as well as increases to insurance premium tax (IPT), the ABI said.
The rate helps to set compensation payouts when people suffer serious injuries, for example following a car crash.
When victims of life-changing injuries accept lump sum compensation, the rate is applied when calculating the payout, to take into account the potential returns they could expect to receive from their money over time from investing the cash.
ABI director general Huw Evans said the “dramatic increase” shows the Government should press ahead with a new framework for the discount rate and call a stop to further IPT hikes.
“The UK is one of the most competitive motor insurance markets in the world, but the unprecedented increase in claims costs is driving up prices to record levels,” he said.
“Most younger and older drivers are likely to face increases even higher than this, hurting people who can least afford it.
“Worryingly these increases are unlikely to be the end of the road if reinsurance premiums go up at the end of the year, adding further costs to insurers.”
A Ministry of Justice spokesman said: “We have consulted on whether there is a better or fairer framework for claimants and defendants in cases of serious personal injury. We will respond to the consultation in due course.”