The current situation makes predicting future claims inflation…and impact on future reinsurance costs more challenging
LONDON, 20 April, 2020 — Comprehensive car insurance premiums have fallen by 1% (£6) in the first quarter of 2020, according to the latest Confused.com Car Insurance Price Index in association with Willis Towers Watson., and which has served to disguise an underlying, gradually increasing trend that reflects inflationary and one-off cost pressures1.
The average cost of car insurance is now £809, following a £47 (6%) increase over the past year, according to the longest established and most comprehensive car insurance price index in the UK, which is based on price data compiled from almost six million customer quotes per quarter.
| Comprehensive Car Insurance - Quarterly Price Trends | |||||
|---|---|---|---|---|---|
| 2019 Q1 | 2019 Q2 | 2019 Q3 | 2019 Q4 | 2020 Q1 | |
| Average Premium* | £762 | £789 | £783 | £815 | £809 |
| % Change in Quarter* | -1% | +3% | -1% | +4% | -1% |
| £ Change in Quarter* | -£12 | +£27 | -£6 | +£32 | -£6 |
| % Change Annually* | -1% | +5% | +3% | +5% | +6% |
| £ Change Annually* | -£5 | +£36 | +£23 | +£41 | +£47 |
Graham Wright, UK Lead of P&C Personal Lines Pricing at Willis Towers Watson, commented: “Premium levels for the first quarter have continued to fluctuate monthly with little evidence of an emerging overall trend, which reflects the uncertainties faced by the market and the challenge of balancing conflicting future trends.
“There is widespread recognition of claim frequency reductions whilst lockdown measures persist and acknowledgement that these may be offset to some degree by severity increases, all of which adds to the uncertainty in the market”
Graham Wright
UK Lead of P&C Personal Lines Pricing at Willis Towers Watson.
“The index data represents a largely pre-Covid period and does not yet give insights into the market’s pricing response to Covid-19, although there is widespread recognition of claim frequency reductions whilst lockdown measures persist and acknowledgement that these may be offset to some degree by severity increases, all of which adds to the uncertainty in the market.”
Drivers in Central and North Wales benefited from the greatest quarterly drop in prices, with their insurance premiums decreasing on average by 3% (£22) to £637. The Scottish Borders and the East Midlands were the two regions in the UK to experience the largest rise in the cost of comprehensive car insurance, with premiums increasing by 2% (£10) and 1% (£11) respectively.
More locally focused data shows that drivers in Salisbury benefited from the greatest quarterly fall of 12% (£82)2, reducing the premiums of drivers in this area to £600. Drivers in the City of London experienced the sharpest rise of 19% (£218), where drivers were paying an average of £1389 in the last three months. The cheapest town is now Llandrindod Wells, where drivers were paying an average of £550 in the first quarter of 2020 for comprehensive car insurance. East London remains the most expensive place in the UK to buy car insurance, with drivers now paying £1,465.
Male drivers aged 71 or over benefited from the greatest price fall, compared to other age groups, seeing a 4% (£20) quarterly price decrease, taking their annual premiums to £525. Meanwhile, male drivers aged between 26 and 30 experienced the largest price rise of 1% (£8), taking their annual premiums to £1093.
Graham Wright noted: “Notwithstanding the specific impacts of Covid-19 on driving behaviours, the current situation makes future prediction of claims inflation, the timing of the Civil Liabilities Bill implementation and the impact on future reinsurance costs all the more challenging. Given the unprecedented nature of the crisis, we will be aiming to publish an interim index during Q2 to provide an update to the market.”
Steve Fletcher, Head of Data Services at Confused.com comments, “If there’s one thing we know for certain it’s that insurers don’t like uncertainty. There is evidence to suggest that it will be a while before prices calm down and that they will continue on the upward trajectory we’ve seen over the past year and a half.
“While we don’t expect insurers to introduce discounts to account for fewer miles being driven, people are looking to make savings at this financially challenging time. The winners will be the insurers that listen to customer needs and simultaneously react to market movements. Societal uncertainty means insurers will need to closely follow this situation as it unfolds.”
The index is compiled using anonymous data from all enquiries submitted on Confused.com. The prices used for analysis are based on an average of the best five quotes received.
Launched in 2002, Confused.com was the UK's first price comparison site for car insurance and is one of the UK’s biggest and most popular price comparison services, generating over one million quotes per month. It has expanded its range of comparison products over the last couple of years to include small van insurance, motorcycle insurance, car buying, and car finance, as well as a number of tools designed to save drivers money on motoring.
Confused.com is not a supplier, insurance company or broker. It provides an objective and unbiased comparison service. By using cutting-edge technology, it has developed a series of intelligent web-based solutions that evaluate a number of risk factors to help customers with their decision-making, subsequently finding them great deals on a wide-range of insurance products, financial services, utilities and more. Confused.com’s service is based on the most up-to-date information provided by UK suppliers and industry regulators.
Confused.com is owned by the Admiral Group plc. Admiral listed on the London Stock Exchange in September 2004. Confused.com is authorised and regulated by the Financial Conduct Authority.
Willis Towers Watson’s Insurance Consulting and Technology business has over 1,200 colleagues operating in 35 markets worldwide. It is a leading provider of advice, solutions and software – primarily to the insurance industry. Its consulting services help clients manage risk and capital, improve business performance and create competitive advantage – by focusing on financial and regulatory reporting, enterprise risk and capital management, M&A and corporate restructuring, products, pricing, business management and strategy.
Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving in more than 140 countries and markets. We design and deliver solutions that manage risk, optimise benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.
1 Data from quotes sought during the UK’s COVID-19 “lockdown” period commencing late in March 2020 were not available in sufficient volume to influence the Q1 index value, and so all price metrics and trends referred to in this report should be regarded as ‘pre-COVID-19’. A special, one-off index release is planned in a few weeks time, which will consider the impact of lockdown on quoting behaviours and on price trends.
2 While the Shetland Isles recorded a larger price decrease in Q1 2020, a small sample size mean the results are not considered statistically significant.
