Why are car insurance prices rising?
At Axios Insurance & Reinsurance Solutions DMCC, we have conversations every day with our clients about why are their car insurance prices rising. Many are asking the same question with little understanding as to why they are paying so much.
According to Confused.com, next year will see the record high with the average cost of car insurance exceed (USD $)1000.
Confused.com publish quarterly reports on the average price of car insurance three months leading up to the report. They show car insurance prices rising with a 16% rise over the last year and suggest there is no sign of it slowing down.
But why is this?
There are a few reasons as to why this is happening. The first is the rises we have seen to IPT over the last few years.
IPT is Insurance Premium Tax and is the tax on general insurance premiums. You can read more about this here. Brokers are increasing prices as a direct result of this as it is a key factor in all insurance premiums pricing.
The second reason is the change in the Ogden rate. If you are unsure as to what this is we have a full blog here that explains it all.
But to recap when someone makes a personal injury claim and is no longer able to work, they are awarded a lump sum by the courts. A discount is taken from this with the idea that if they invest the money correctly they will eventually get the full amount. In a nutshell the discount rate has been lowered meaning that the insurers are having to pay out more.
In correlation insurers are having to increase their prices to compensate for paying out more for claims.
How To Lower Car Insurance Premiums
There are ways in which you can lower your car premiums. A few examples of these are…
… Get a black box or telematics insurance
This is when the insurance company will monitor the way you drive and rate you based on speed, braking and at what times you drive. These policies often give you a reward for good driving. This can lower your premiums because you will be seen as less of a risk to the insurer.
… Add other drivers to your policy
This is mainly essential for younger drivers, but adding more experienced driver to your policy you can decrease the cost of your car insurance.
… Increase your excess premiums
Increasing the voluntary excess on your insurance can help toward lowering the price. Additionally you can take away the worry of having a huge excess by purchasing an Excess Protect policy for a fraction of the money that you save overall.
… Choose your car carefully
This may not be an obvious one to some but your insurance can be heavily affected by the car your drive based on its engine size etc. Therefore, when shopping for a new car we recommend checking the price of the insurance before you buy as you may be surprised.
… Collecting your no claims bonus
Many young drivers have policies in their parents name as it is a cheaper option to begin with. However, the quicker you have a policy in your own name the quicker your no claims bonus will build up. This is a great way to reduce your premiums year on year. It shows the insurer that you are a reliable and safe driver, much like the telematics insurance policy.
If you have any questions about this, or would like someone to explain anything in this post to you in further detail then contact one of our team today.