New rules set by the Financial Conduct Authority, which came into effect last week, stipulate that car insurance firms must be more transparent. Firms are now obliged to reveal how much a renewed premium costs compared to the previous year’s renewal.
In theory, by increasing pricing transparency, any price hikes should require valid justifications. However, some of the team here at PetrolPrices.com have noticed from their own experiences this week that insurers are sending emails to customers without the old price one to two weeks before the official renewal letter, in the hope this will convert customers before they see the price difference in the letter.
Premiums have risen by 8% since last year, according to the Association of British Insurers, so this new tactic is adding insult to injury. The average premium is now £462 – the highest it’s been since 2012. Meanwhile, the average comprehensive policy has risen by 16%, to £781.
Research compiled by Consumer Intelligence predicts that average insurance premiums could hit £1,000 in a year’s time. Insurers cite an increase in repair bills, compensation calculation changes, insurance premium tax and fake whiplash claims as causes of the price hikes.
Interestingly, the number of claims has decreased by 12% year on year, campaigning law firm Thompsons Solicitors said last week.
This raises several important questions about what is actually going on. Are we seeing profiteering on the part of insurers or a genuine shift towards driving becoming a much more expensive thing to do? Are car insurance firms being truthful about premium rises?
Thompsons Solicitors’ head of policy, Tom Jones, said:
“It’s clear that the number of claims – whether they’re up or down – has no bearing on the cost of car insurance, and that the industry is set on increasing premiums no matter what.”
Taxing insurers, not consumers
The government has increased taxes, with Insurance Premium Tax due to rise from 10% to 12% in June. However, the Treasury has insisted that the “Insurance Premium Tax is a tax on insurers, not consumers” and that it is the insurance firms’ choice whether they pass the costs onto customers.
Given the updates to taxes on fuel, congestion and pollution and fines for speeding, littering and mobile phone use that have been reported recently, we’re beginning to wonder whether the government’s plan is to make it too expensive for people to drive on Britain’s roads. That’s certainly one way to go about hitting their pollution targets!
What are your thoughts on tackling the issue? Are we being misled by insurers and the government? Is this part of a grand plan to get motorists off the road to meet pollution targets? Tell us what you think below.