Car insurance premiums are about to rocket

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Figures released recently by the Institute and Faculty of Actuaries confirm what many motorists have thought to be true in recent years – car insurance is getting more expensive.

It comes as bad news at a time when petrol prices are making driving an even costlier pursuit than normal, and when financial and economic uncertainty abounds.

Rising insurance might suggest that the impact of fuel inflation and austerity has not stopped drivers from taking to the roads and getting involved in accidents. But the Institute’s findings suggested that was not the case, and that, arguably, something more sinister is behind the increase.

Lower claims, higher costs

In 2011, there was an 11% drop in the number of claims made by UK motorists. It seems unlikely that one in ten of us suddenly became much better, or safer, drivers, and the drop has been attributed to drivers opting to leave the car in the drive in favour of staying at home, walking, public transport, or riding a bike.

Green and health-conscious motivations will have caused some of that tail-off, but in the main, it is the cost of driving that has turned many once-avid drivers off. This reduction is a telling portrait of the pressures everyday members of the public are under, but it was far from the most eye-opening statistic the Institute had uncovered.

Whiplash

While insurance claims had dropped at a rate of one in ten, the number of personal injury claims rose by a staggering 18%, and it is these whiplash claims that are driving the inopportune growth in car insurance costs

While not all claims were successful, the number of pay-outs rose by almost 10%, meaning the rise in personal injury cases added a £400million burden to the UK’s car insurers. It is not the insurers who will foot the bill, however: these extra costs are being passed on in the shape of more expensive car insurance policies.

Hotspots

So are people’s necks and backs getting weaker? It seems unlikely. Evidence points strongly to the increase in claims centring on specific whiplash hotspots in the UK, and that many of these ‘claims clusters’, including Oldham, Liverpool, Sunderland and Wigan, see a greater density of personal injury claims management companies operating.

David Brown, Chairman of the Institute, said: “The clear correlation between claims management office locations and the ‘hotspots’… suggest the two are interlinked. We expect to see legislation coming soon which will affect the way these companies do business.”

Lessening the effect

The least-affected areas in the country are Aberdeen, Kingston-upon-Thames, Exeter, Cambridge and Dorchester, and drivers here should see a lower uplift than elsewhere. Less fortunate drivers will need to resort to other tactics to dampen the effect of rising premiums. Building up or protecting a no claims bonus is a good place to start, as is securing advanced driving qualifications, parking the car off the road, or adding improved security and safety devices.

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