UK car insurance prices drop 11% in a year

UK car insurance prices are falling at their fastest annual rate since 2014.

According to and Willis Towers Watson, the average car insurance premium fell 11 per cent in the 12 months to the end of June, to ÂŁ752.

The fall will come as a blow to motor insurers, whose share prices have come under pressure in recent months as fears have grown about the impact of falling prices on their profits.

Over the past three months, shares in Hastings have fallen almost 15 per cent, while Direct Line and Esure are both down by about 7 per cent according to data from S&P Global Market Intelligence.

Graham Wright, a personal insurance pricing specialist at Willis Towers Watson, said that conditions were becoming tougher for motor insurers. “Increasing competition for market share, combined with falling premiums, will begin to bite. These challenges come on top of the ongoing pressures on repair costs.”

One of the reasons for the fall in prices is that insurers are already pricing in the benefits of government legislation designed to cut the cost of personal injury claims.

The Civil Liability Bill, which was unveiled in March, is making its way through parliament. But Mr Wright warned that Brexit could delay its passage, potentially pushing back its implementation date from April 2019.

Car insurance prices rose steadily between mid-2014 and mid-2017, but the proposed reforms to the way that large personal injury claims are calculated — and to the system for making smaller whiplash claims — reversed that trend.

There are fears that the fall in prices could go beyond the expected fall in claims costs. In a note to clients earlier this month, analysts at Barclays warned that: “market cycles tend to overshoot, particularly as all the listed players are looking for growth”. They added that they expected listed insurers to be cautious in their guidance to the market in the forthcoming half-year results season.

The tough conditions this year come after a strong 2017 for the industry. According to data from EY, it produced its best underwriting result since 1994 last year, due to rising prices in the first half of the year and uncertainty over the reforms to personal injury compensation.


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