The cost of annual car cover is falling at its fastest pace since 2014 marking the fourth quarter of declines in a row, data shows.
Motorists paid £752 a year on average for annual cover in the three months to the end of June, which is £16 less than the previous quarter and £95 less than last year, according to figures by comparison website Confused and Willis Tower Watson.
Car insurance prices, which rose over the three years between mid-2014 to mid-2017 until reaching a peak of £847 last summer, have started falling recently.
This is partly because of looming reforms to whiplash claims and the way large personal insurance claims are calculated that are expected to cut costs for insurers.
Falling prices: Car insurance cover costs £752 a year on average
But despite the recent drop, car insurance prices are on average still £253 more expensive than rock-bottom premiums seen 10 years ago, when they were £499 on average.
Steve Fletcher, head of data insight at Confused, said that while prices were continuing to fall, they were doing so at a much slower rate than the last quarter.
He added: ‘This suggests there appears to be a correcting of the steep increases we saw this time last year, where insurers increased their premiums following the change to the Ogden rate.
‘What we are now seeing is the plateauing of increases over the past three years, and potentially the home-coming of a period of steadily decreasing premiums.’
While the drop in prices is good for motorists, it makes life tougher for motor insurers, who have seen share prices come under pressure in recent months amid fears about falling prices on their profits.
Insurance companies have been lowering prices as the Government recently confirmed plans to reverse last year’s changes to the Ogden rate – which is used to calculate injury compensation – after giving in to insurers’ complaints that victims were being overcompensated.
The Ogden rate, which is an assumption about the amount of interest that a claimant can expect to get on money being invested, has been cut from 2.5 to -0.75 per cent.
However, insurers lobbying the Government said it would make further reforms to their benefit.
With Brexit looming, there’s a risk that insurers will see further delays to the introduction of a new discount rate, which is expected in April next year.
Graham Wright at Willis Towers Watson said: ‘Insurers have enjoyed one of the best underwriting results since the mid 1990s, however conditions are likely to get tougher this year.
‘Increasing competition for market share, combined with falling premiums, will begin to bite.
‘These challenges come on top of the ongoing pressures on repair costs and the continuing prioritisation of Brexit, which risks pushing back further the introduction of a new discount rate, currently timetabled for April 2019.’
Car insurance prices fell for most age groups, with those aged 68 paying £496, or 8.7 per cent less than the previous quarter, while 17-year old drivers seeing a 5.7 per cent fall to an annual average of £1,889.
Changes to Ogdem rate are expected to be introduced in April 2019, but Brexit could delay plans
Female drivers aged between 61 and 65 were paying the least and less than half the national average, with a bill of just £356.
Prices also dropped across all of the UK with the exception of the Scottish Highlands and Islands, where premiums bucked the downward trend by increasing on average by one per cent in the last three months.
Drivers in Northern Ireland were best off with their insurance premiums decreasing on average by 4.3 per cent to £894, followed by a 3.5 per cent drop in prices in the East Midlands to £716.
Drivers in Kirkwall saw the biggest quarterly fall of 9.3 per cent to £582, followed by those in St Albans with a cut of 7.8 per cent to £738.
East London remains the most expensive location in the country for car insurance at £1,435, despite a £14 fall.
The cheapest places for motor insurance in the UK are Dorchester and Llandrindod Wells, where drivers were paying an average of £522 in the last three months.
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