Insurance premiums stall finds AA
Insurance premiums stall finds AA
Thursday, 17 Apr 2008 16:34
The widely predicted spike in property and vehicle insurances following last year's flooding is not being realized.
That is the conclusion of the AA British insurance premium index, which finds prices have actually been falling in some areas.
Average comprehensive car insurance premiums fell 0.5 per cent to £681.93 in the first quarter of 2008, down from £685.29 in the previous quarter.
Similarly, the average third-party fire and theft car insurance premiums fell 0.9 per cent to £838.50 over the period, down from £846.28 final quarter of 2007.
"A recent Datamonitor report suggested that the car insurance industry could become profitable by the end of 2009 - but we calculate that an annual premium increase of 20 per cent would be needed to achieve that," said Andrew Strong, chief executive of AA Insurance.
"The latest AA Index shows that this is a far from realistic expectation."
AA research finds the car insurance industry pays out £112 for ever £100 taken in premiums.
However, insurers are loath to raise prices as this is likely to see a slump in market share – especially during the peak purchasing month on March.
"If premiums don't continue to rise at a realistic rate, there will be a point when large premium increases become inevitable. That would unhelpful for customers and will damage the reputation of the industry," explained Mr Strong.
In terms of property the picture was also positive for consumers.
The average cost of combined home and contents insurance quotes fell 1.4 per cent from £297.19 in the final quarter of 2007, to £293.11 in the first quarter of this year.
Average buildings insurance premiums fell 0.2 per cent to £208.51, while average contents insurance premiums rose one per cent to £128.57.
"I believe the slight fall in average quoted premiums for buildings cover is explained by a rise in the number of risks not being quoted by some insurers, suggesting sensitivity to flood risk," explained Mr Strong.
"It is more likely that insurers will want to know more - for example what flood protection measures are being taken by local authorities - before quoting, while an existing insurer will continue to provide cover following a flood."