Why car insurance premiums will continue to rise in 2020: Card Payment

10 February 2020, 09:37

Why car insurance premiums will continue to rise in 2020

GoCompare explores the five key inflationary pressures set to impact prices this year

  • Insurers faced with higher repair costs, higher compensation payments and rising theft claims are likely to hike premiums;
  • Brexit uncertainty and fraud add to insurers’ cost pressures;
  • Drivers urged to shop around for car insurance - on average, GoCompare Car Insurance customers benefit on average by £2561 by switching.

GoCompare Car Insurance is warning drivers that the cost of insurance is likely to rise in 2020 as insurers reflect higher claims costs. 

An upsurge in theft - including keyless car crime, Government changes to the way personal injury compensation is calculated and record repair costs are key factors in pushing-up claims costs.  Uncertainty surrounding Brexit and the weakened pound has also increased the cost of vehicle repair claims by increasing the cost of imported parts. 

As a result, GoCompare believes that overall, car insurance premiums are likely to continue to rise throughout 2020.  However, drivers shouldn’t accept their own premium rising as inevitable.  The market for car insurance is highly competitive and substantial savings can be made by shopping around.  On average, customers arranging their insurance through GoCompare Car Insurance saved £256.       

Lee Griffin, CEO and a founder of GoCompare Car Insurance commented, “We’re expecting this year to be another challenging one for car insurers, with a perfect storm of factors coming together to put further pressure on premiums.  In addition to rising claims costs, economic and political uncertainty, insurers may face regulatory measures to change their pricing practices as the Financial Conduct Authority publishes its report and remedies on making the car insurance market work better for customers. 

“There are also concerns that as the Government seeks to raise revenue, the rate of insurance premium tax (IPT) charged on car insurance – which currently stands at 12%, could come under the spotlight again, with some experts fearing it could rise to 20% in line with other insurances and VAT.  The rate of IPT has been unchanged since June 2017, and hopefully this year won’t be the year it is reviewed upwards again.

“Rather than just sitting back and accepting a bigger bill for their car insurance, motorists should shop around to find cover at a good price, that suits their needs.” 

The five reasons why car insurance premiums won’t fall anytime soon:

  1. Car theft is on the increase

Police recorded crime figures2 show a 3% increase in vehicle offences, mainly as a result of increases in ‘theft or unauthorised taking of a motor vehicle’ (up 7%) and ‘theft from a vehicle’ (up 2%).  Vehicle related offences have been on the increase since 2015. 

The vulnerability of some cars to keyless entry theft, where thieves intercept the signal between the keyless fob and the car, is of particular concern to insurers.  According to the Association of British Insurers3, claims for the theft of vehicles more than doubled from £42 million in 2013 Q3, to £88 million in 2018 Q3.  More expensive cars are being stolen, increasing the average claim for a stolen car to over £8,000 in Q2 2018 (up £3,500 from 2013 when records began).

  1. Government change to the calculation of personal injury compensation (the Ogden discount rate)

The Ogden discount rate is a calculation used to determine the amount insurers should pay as compensation to people who have suffered life-changing injuries so that it will cover all their predicted future expenses, including loss of income and care costs. However, because the compensation is paid in a lump sum, the amount is discounted to account for interest payments.  Government changes to the rate further adds to the pressure on insurers’ costs, which will be reflected in higher premiums.

  1. Sophisticated vehicle technology pushes-up repair costs

Advanced driver assistance technology systems such as automatic emergency braking, speed limit devices, blind spot and parking sensors help reduce accidents however, they are typically located in parts of a vehicle vulnerable to damage from impacts (i.e. bumpers and wing-mirrors) which makes repairs much more complex and expensive.  Insurers pay-out over £12 million3 a day to repair damaged vehicles.  The increasing use of sophisticated technology has also resulted in insurers categorising more vehicles as uneconomical to repair.

  1. Brexit

With economic uncertainty already causing a fall in the value of the pound, this has increased the cost of imported cars and replacement parts – further adding to the cost of vehicle repairs.        

  1. Insurance fraud

Despite insurers putting in place robust fraud detection systems and working with the police, motor insurance fraud remains a big issue.  Insurance fraud (including providing false information on an application, false or exaggerated claims and ghost (fake) brokers) pushes up the cost of cover for all motorists.  Industry figures on detected fraud show that car insurance scams are the most common and most expensive, with 55,000 dishonest claims worth £629 million detected.  Most (80%) involved personal injury fraud ranging from staged crash for cash frauds to opportunistic scams.  

For more information on ways to cut the cost car insurance, visit: https://www.gocompare.com/car-insurance/guide/top-tips-for-cheaper-car-insurance/

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For further information please contact:

Anders Nilsson or Louisa Marsden at GoCompare on 01633 654 054 / 01633 655 132

Gordon, Jason or Liz at MAW Communications on 01603 505 845

Keep up-to-date with GoCompare on Twitter; @GoCompare

Notes to editors

1Price saving based on independent research by Consumer Intelligence, conducted between 1 October to 31 October 2019: It compared 28 insurers from our panel and found 51% could save up to £256.09 with GoCompare on their car insurance

2ONS Crime in England and Wales Year ending June 2019: https://www.ons.gov.uk/peoplepopulationandcommunity/crimeandjustice/bulletins/crimeinenglandandwales/yearendingjune2019

3ABI UK Insurance and Long-Term Savings The state of the market 2019: https://www.abi.org.uk/globalassets/files/publications/public/data/abi_bro6778_state_of_market_2019_web.pdf

4ABI Detected insurance frauds in 2018: https://www.abi.org.uk/news/news-articles/2019/08/detected-insurance-frauds-in-2018/

GoCompare

GoCompare is a comparison website that enables people to compare the costs and features of a wide variety of insurance policies, financial products and energy tariffs.

GoCompare does not charge people to use its services, and it does not accept advertising or sponsored listings, so all product comparisons are unbiased. GoCompare makes its money through fees paid by the providers of products that appear on its various comparison services when a customer buys through the site.

GoCompare does not sell its customers’ data.

When it launched in 2006, it was the first comparison site to focus on displaying policy details rather than just listing prices, with the aim of helping people to make better-informed decisions when buying their insurance. GoCompare has remained dedicated to helping people choose the most appropriate products rather than just the cheapest, and has teamed up with Defaqto, the independent financial researcher, to integrate additional policy information into a number of its insurance comparison services. This allows people to compare up to an extra 30 features of cover.

GoCompare is the only comparison website to be invited to join the British Insurance Brokers’ Association (BIBA) and is authorised and regulated by the Financial Conduct Authority (FCA).

For more information visit www.gocompare.com and www.gocomparegroup.com

Contact Information

Louisa Marsden

Senior PR Executive

GoCompare

01633 655 132

louisa.marsden@gocompare.com