Car Insurance premiums have dropped for the first time in several years. After several years of rises, the average cost of insuring a car has finally shrunk. According to a study by confused.com, the average price of car insurance has dropped by £95, or 11%. However, it is yet to be seen whether this will benefit customers on renewal of their policy.
Why were they so high?
Car insurance premiums are priced by insurers in a way that covers the potential costs the policy holders might incur. This means that if laws or practices are changed in a way that impacts what insurance companies are likely to pay, prices go up. In past years, this price rise has been caused by changes to the Ogden rate. The Ogden rate determines how much people are paid in compensation after an injury. When this rate rises, insurers raise prices to counter the cost to them.
Why have they dropped?
Insurance companies do not want their premiums to be high. However, they need to cover their potential costs. When insurers are able to absorb the costs of a rise, they usually lower prices appropriately. This is what has happened in the last year. Insurers have recovered from the Ogden rate rises, and are able to factor them into their premiums.
Will they drop further?
Despite the drop, car insurance premiums are still much higher than they were several years ago. Indeed, there is still a large disparity between prices around the country. In Scotland, you are likely to pay less (£611 on average) than you are in London (£1000+ on average). This variety in prices demonstrates the unpredictable nature of car insurance premiums. It is hard to know if the recent drop is part of a trend, or a one off event, when prices vary so much. Time will tell whether car insurance premiums continue to drop or not.
Alternative Insurance Brokers work with a wide panel of insurers to find the right insurance policies for you. We use all our experience to pass on the recent drop in costs to you. Contact us today for a quote that works for you.