Car premiums plunge by record 14.1%
Car insurance premiums plunged by a record rate of 14.1% over the last year amid a "more fiercely competitive market" and expectations that more bogus whiplash claims will be weeded out.
The typical quote for annual comprehensive car insurance cover was £533 in January , which was also a record 4.6% slide on the previous quarter , according to the latest AA Insurance premium index, which takes the average of the five cheapest quotes on the market.
But despite this better news for motorists, Simon Douglas, director of AA Insurance, warned that premiums may have been falling too fast ahead of much-anticipated changes within the industry. He said that "helter-skelter" prices could end up bouncing back up sharply later this year.
The AA British Insurance Premium Index, which has been running for 20 years, found that the North West remains the most costly region to insure a car, with the average premium for someone who shops around standing at £809, although this region also saw the biggest price drop over the past quarter at 6.3%.
Scotland is also still the cheapest place in Britain to insure a car, with the premium for someone who shops around falling to £389 after a 4.9% drop on the previous quarter. The average premium in Wales is £492, while in London it is £629.
Motorists aged between 17 and 22 years old saw the biggest drop in the premiums they were offered over the last quarter, with a 5.4% fall taking the average premium for someone in this age group who shops around to £1,187.
Those aged between 60 and 69 years old are offered the cheapest average "shoparound" premium at £302. This age group has seen a 4.1% drop in prices over the last quarter.
Last autumn, Justice Secretary Chris Grayling unveiled tougher action to combat whiplash injury fraud, including independent medical panels to make it harder for people to exaggerate or make up injury claims. Insurers estimate bogus whiplash claims typically add an extra £90 to a driver's policy.
A joint initiative between insurers and the DVLA, called My Licence, is also being introduced to cut more errors out of the car insurance application process. The initiative means that motorists renewing their insurance will be asked to provide their driving licence number, which will give insurers a more accurate picture of a driver's experience and convictions. It is estimated that cutting out errors will result in a £15 reduction on average in the cost of cover.
Mr Douglas said the record falls in premiums have come about due to "a combination of both the fiercely competitive nature of the market as well as the as-yet unfulfilled anticipation that law changes will weed out costly fraudulent whiplash claims".
He also said he feared that premiums had been falling too strongly ahead of the anticipated savings that might be made.
Mr Douglas said: "It's as if premiums are on a helter-skelter slide. I fear that the downward spiral will end with a bump.
"And while I expect the falls to continue at a slower rate over the first quarter of this year, I think they will then level off.
"But my biggest fear is that if the falls are too great, premiums will bounce sharply up again later in the year. That would not be good for the reputation of the industry."