Insurers have reported that motor premiums have fallen to their lowest levels for two years – and have partly cited legislation yet to even come into force.
The Association of British Insurers said yesterday that the average price paid for motor insurance in the first quarter of this year was £466. The last time this figure was so low was in the first quarter of 2017. The average premium has fallen by £15 on the previous quarter and was the largest quarter on quarter fall since 2013.
The ABI says its members are already passing on expected savings in anticipation of the reforms included in the Civil Liability Act, which come into force next April. Recent falls are also due to new vehicle registrations increasing, which are typically linked to older, lower-risk drivers.
Mark Shepherd, the ABI’s assistant director and head of general insurance policy, said: ’As the industry promised, motorists are now beginning to see the benefits of the personal injury reforms recently enacted.’
He sounded a note of caution, however, about the rising cost of repairs and the possibility of the government further increasing insurance premium tax. Shepherd added that motorists should ‘make the most from a competitive market’.
The ABI did not suggest that falling premiums are linked to a decrease in the number of personal injury claims, as has happened in the past couple of years.
While the ABI figures reflect recent falls, taking a longer term view insurance premiums have risen markedly since the last set of major reforms affecting the claims sector.
Insurers had pledged that costs would come down following the Legal Aid, Sentencing and Punishment of Offenders Act, which in 2013 abolished the recoverability of success fees and ATE premiums from losing defendants – with knock-on benefits for insurance companies.
Initially following LASPO, premiums dipped to below £390 on average, but in the last four years motorists have seen charges rise by almost 20%. By the end of 2017, average prices were almost £500 for each customer.
The government has said it is assured insurers will pass on savings from the Civil Liability Act, although there are no plans to test this submission until 2024. The expected saving is a matter of dispute, having been forecast at £35 by ministers but whittled down to just £16 by some analysts.
The legislation will effectively take lawyers out of low-level RTA claims, with claimants instead using an upgraded portal that can handle their case. Damages will be set by tariffs at much lower rates than currently paid out.