Fall in premiums slams into reverse – car insurance prices up by 8%

We’ve just drilled through 1.9 million car insurance quotes run on our site in the past few weeks and found that premiums rose by 8% in May 2015, compared to May 2014. The average annual premium is now £443, up from £411 in May 2014 – adding £32 to a typical policy.
Motor or car insurance application
Car insurance premiums had been dropping year-on-year since 2011, falling by over a quarter (26%) between May 2011 and May 2014. However, 2015’s figures buck the trend, making it even more important to shop around for the most competitive price for the cover you require.

Whiplash claims

One reason for premiums creeping up is the continued high level of compensation claims for whiplash and other injuries sustained in car accidents. Insurers will tell you they have no problem paying compensation for genuine injuries. The problem is that many claims – no-one knows for sure just how many – are fraudulent. The best guess is that, of the £90 we all pay as part of our car insurance premiums to pay whiplash claims, around £50 goes on fraud. There are two main types of fraud associated with whiplash. The first is when the effects of a genuine injury are exaggerated, while the second is when the injury itself is fabricated. This might be when someone is involved in an accident but is not injured – they can still claim to have whiplash since there are no identifiable symptoms. It could also be where the ‘accident’ itself is caused deliberately between the fraudster and an innocent motorist, or where it is ‘staged’ by a group of willing participants. Once there is a collision of some kind, those involved can say they are suffering from whiplash and submit an insurance claim.

Compensation culture

The Government, along with the insurance industry and consumer groups, is keen to tackle the problem of fraudulent claims and has recently introduced a series of measures in an attempt to curb the worst excesses of the UK’s ‘compensation culture’. It has imposed a ban on referral fees in personal injury claims, so details of accidents cannot be sold onto lawyers. It also wants future whiplash claims to be substantiated by accredited medical experts, with no commercial tie between experts and lawyers. Legal firms won’t be able to offer inducements (such as a laptop) to encourage people to claim, and those who produce medical reports can no longer offer treatment to the same individual. Insurers and lawyers will be encouraged to share information in a bid to bring a serial fraudster’s past mis-deeds to light Despite the whiplash crackdown, the number and value of whiplash claims has not fallen as far as insurers had hoped, and insurers are hiking premiums as a result.

Avoid ‘auto-renewal’

It’s worth remembering that many drivers lose out when their policy is automatically renewed by their insurer. Existing insurers often charge more than the driver would pay elsewhere, so it always pays to shop around for cover. Using MoneySuperMarket can save motorists up to £224 on their policies (51% of consumers could save up to £224.18 (exc legal), Consumer Intelligence November 2014).

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