All Sections

Are comparison websites partly to blame for a rise in car insurance premiums?

Comparison websites are supposed to bring about greater levels of competition and therefore make things cheaper for consumers, but it seems that may not always be the case.

Many insurers are now shying away from loss-leading introductory insurance offers and putting their prices up as motorists make a habit of hunting out new deals and leaving their chosen insurer after their contracts expires.

Analysis from the latest AA British Insurance Premium Index discovered the average cost of annual comprehensive cover had increased by £12.50 to £568 in the three months up to July 2016. 

Last year, the average cost of five of the cheapest quotes from comparison websites was £484.86 – up by nearly £84. To make matters worse, experts believe the figures are on an upward trajectory. 

“Premiums have not risen by as much over the second quarter as some commentators predicted although it’s still an upward trend that I expect to continue over the rest of the year,” AA director of insurance Michael Lloyd commented.
 
He added: “For example, increasing numbers of car owners shop around for their cover every year, especially at a time when premiums are going up.” 

Lloyd went on to explain: “As more people look for introductory offers there is less incentive for companies to offer loss-making prices to attract new business that will, a year later, go elsewhere. So I believe this is one driver of recent premium increases while insurers are looking for ways to better reward customer loyalty.”

Other reasons for the insurance premium increase, which is making motorists pay more than ever to ensure their car is road-legal, includes the Insurance Premium Tax (IPT), which rose by 67 per cent over the first three months of 2016.

This had the knock-on effect of increasing premiums by 15 per cent, hitting the highest level ever recorded, according to the British Insurance Brokers’ Association (BIBA) and the Acturis Insurance Price Index.

Not only that, claims for whiplash are still “unacceptably high” and this is partly down to firms cold-calling people in a bid to get them to claim. The increase in uninsured drivers is another factor, as is the difficulty and cost of repairing increasingly complex vehicles.

A Confused.com quarterly index revealed a 19 per cent increase within the last 12 months and that it was the biggest spike in five years. It found London dwellers were paying the more than any other region, but pointed out the UK average was still below the £858 it saw in 2011.

No wonder, then, some motorists are letting insurance companies install black box telematics devices in a bid to reduce the premium. Because it’s that or take the bus, which is simply unfeasible for hard-up motorists with families.

With the cost going up across the board, getting a good deal may be harder than ever but we would suggest at least five phone calls to different providers and some time spent on comparison websites to ensure you get the cheapest deal.

Comments