How high have car insurance premiums risen so far in 2011?
By Kate Saines
Earlier in the year we tried to asses how high car insurance premiums would rise by in 2011 and in this feature we take a look at what has actually happened so far this year and gather together the best assessment for the rest of 2011.
The beauty of car insurance, we are told, is as we notch up more years of experience and more unblemished insurance policies the cheaper our premiums will become.
Yet, why does it always seem as if we are forking out increasing amounts of cash to insure our vehicles each year?
The fact is car insurance premiums have been soaring in recent years. And the last year has seen the average cost of insuring a car rise to record-breaking levels.
Figures compiled for the AA British Insurance Premium Index revealed the average Shoparound premium – the average of the cheapest three quotes for a customer - for annual comprehensive car insurance was £892 at the end of March 2011.
This was the result of a rise of more than 40 per cent over 12 months.
It's the biggest annual increase the index has ever recorded since it began tracking car and home insurance premiums in 1994.
And not only does this mean our already dwindling recession-hit budgets are suffering further strain but it's causing a whole raft of other problems too.
Simon Douglas, director of AA Insurance, said: "The record rises in fuel costs coupled with spiralling car insurance premiums is disappointing news and is making driving unaffordable for many, especially cash-strapped young drivers.
"This is leading to more people withholding information when taking out a policy or exaggerating personal injury claims to reduce their costs.
"But this simply piles on costs for insurers and results in yet higher premiums for honest motorists."
First three months of 2011
So how have things been going since the start of 2011?
The year began dismally for drivers. The first three months of the year, typically a time when premiums show little movement, saw the typical Shoparound premium for a comprehensive car insurance policy rise by 5.9 per cent.
Meanwhile the AA's index showed the average quote for a Third Party, Fire and Theft (TPFT) policy went up by 10.7 per cent in the first three months of 2011, and soared 82.1 per cent over the 12 months to March 2011.
This high figure is a reflection of the fact most TPFT policies are bought by young drivers and the AA pointed out that many insurers no longer offered this type of cover.
However the fact that even comprehensive policies saw such a marked increase in premium prices reveals it's not just the young drivers who have been hit with the hikes.
And, believe it or not, despite the price increases the insurers are failing to profit.
Simon Douglas added: "Despite the sharp premium increases, insurers are still making losses although the large underwriting deficits of 2009 have probably now been halved."
The reason for this is, despite the number of accidents in Britain reducing, claims are rising thanks (or 'no thanks' you might argue) to the UK's no-win-no-fee culture becoming more and more prominent.
If you have ever been a recipient of an unsolicited text from a solicitor offering you the potential to win thousands of pounds for a 'recent accident' you might be a little closer to understanding this state of affairs.
These are sent to people regardless of whether they have had an accident or not. Mr Douglas added: "Although the number of collisions on Britain's roads is falling, the number of claims for whiplash injury is rising.
"It's tempting to make such claims with the huge number of 'accident management' law firms using cold-call marketing techniques."
The upshot of all this is insurers are paying out for accidents which happened years ago and for which no mention of personal injury was mentioned at the time.
As always it's the young – those in the 17 to 22 age group – who have taken the biggest impact of the price increases.
It's typical, said the AA in March, for a driver in this age group to pay a premium of £2,431 – 64 per cent more than they were paying in March 2010.
Young men still pay more than young women, but this will change when the gender discrimination ruling comes into effect in December 2012 and insurance for females will rise to the same level as men's.
Use the Myfinances.co.uk comparison tables to find the best deal on car insurance
What will happen to premiums for the rest of 2011?
The AA's figures provide a picture of what's been happening to premiums up until the end of March, but what about the rest of the year?
A recent report by business advisers Mazars warned young driver premiums look set to soar by 50 per cent in the future making car insurance unaffordable for people in this age group.
Meanwhile, in June, price comparison website Confused.com published consumer research providing evidence premiums were continuing to rise dramatically for newly-qualified drivers, who could expect to pay £2,000 to insure a small hatchback.
It said the cheapest premium in June 2010 for a new driver insuring a Ford Ka was just under £900. In June 2011, however, the best quote had soared to £1,900.
Despite this, the AA said things were not quite as bad as they seemed. While it could not yet provide us with official figures on car insurance premiums for the second quarter of 2011, it was prepared to reveal prices were not rising at the astonishing rate they had been.
Ian Crowder, a spokesman for AA Insurance, said: "The year ending March 31st was a record in terms of premium increases and we believe that the worst is now over.
"We do think recent reports from Deloitte and Mazars on car insurance are overly pessimistic."
Tips for lowering your premiums
It seems clear, despite different predictions, that premiums for car insurance are certainly not going to plummet in the near future. However, there are a few perfectly legitimate methods you can adopt to help lower your premiums – even by a few quid. Getting a car which guarantees lower premiums is a great way for new drivers to help lower the cost.
Gareth Kloet of Confused.com said the Fiat 500 was a new favourite with freshly qualified drivers, with the lowest premium of all the popular new-driver cars.
He added: "The popularity of these cars may have been led by their use by many driving instructors, and also by the relatively cheap insurance cost compared to other small cars."
Premiums will come down if you reduce your annual mileage or if your circumstances change – for example if you get a job which requires less driving. Make sure you inform your insurer if anything changes which could affect your car insurance.
Graham Donoghue, managing director of Moneysupermarket.com, said: "If you change your job or other circumstances mean you travel more or less than previously, you should always mention this to your insurer.
"If you can show your insurer that your usage has reduced then this can result in a lower premium," he added.
Some insurers will take very kindly to drivers with Pass Plus or Institute of Advanced Motorists (IAM) qualifications.
And paying for premiums annually instead of monthly will save you money too. This is because there are often costs involved for insurers in accepting monthly direct debit payments so they charge customers accordingly. Improving security on your vehicle may also lower premiums.
If you are a young driver it might also be worth looking into new Black Box pay-as-you-go policies. Insurer, Young Marmalade, is one company which uses this method. The idea is a black box is installed in your car which monitors your driving and adjusts your premiums accordingly.
The AA is also bringing in a similar policy in the Autumn and believes that products such as this along with driving education is the way forward in helping young drivers take to the road safely and responsibly and therefore, eventually, reducing premiums.
Simon Douglas of the AA said the Black Box system placed the opportunity to reduce insurance premiums firmly in the hands of young drivers.
He added: "Those who score well based on their driving performance could see their premiums fall more quickly than by a conventional no-claims bonus.
"Those who drive aggressively will see premiums increase: but it would also allow such drivers to be offered remedial driver training."
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