A recent trend in the insurance market is the passing on of sharp price increases from secondary-reinsurance companies on to young drivers. This has resulted in an increase of around £100 in the annual car insurance premiums. Insurance companies buy insurance cover from the ‘re-insurance’ industry who have increased the cost of cover for the insurance companies.
The steep price rise is attributed to an increase in the compensatory payouts to the victims of a car accident. Further, since 2004 these periodic payment orders (PPO) are to be provided to the victim periodically as opposed to the standard procedure of handing over the total amount in one go. With the increasing number of PPOs, the total expenditure amounts to hundreds of thousands of pounds a year, thus increasing the load on the driver’s annual car insurance premiums.
Expert brokers like Jeremy King and Benfield claim that the sudden increase in the payouts have left the insurance companies with no choice but to extract the same out of the drivers on top of the sharp hike in prices last year.
Results of a recent study by the AA claim that insurance premiums rose to over £1,000, an increase of about 9 per cent from the last year’s premiums, the average car insurance premium for a person between 17-22 being £2,792.
Another estimate is that in a couple of months, the insurance companies will derive the increased cost of cover for reinsurance by increasing the cost of premiums from 3 per cent to up to 10 percent, keeping the young drivers at the receiving end.