Home and car insurance prices have fallen in the first quarter of 2018

3rd May 2018

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Motorists were hit with an array of insurance premium hikes during 2017, when rises in Insurance Premium Tax and fraudulent claims played their part. The Ogden rate, used in calculating the extent to which compensation payouts should be discounted, also saw changes that adversely affected prices. The rate was slashed from 2.5% to just 0.75%, necessitating heftier payouts from insurers.

However, for motorists who have felt the punishing effect of rising premiums, late April brought "a glimmer of good news". Those were the words of AA director of insurance Michael Lloyd, whose organisation found that prices for both home and car insurance actually fell in 2018's first quarter.

Green shoots despite fluctuating prices

According to the AA's research detailed by the Independent, the average quoted premium for car insurance fell to £660.64 during the quarter. That was 2% lower than during 2017's closing three months. Meanwhile, average quotes for various forms of home insurance - including home buildings, contents and combined policies - all dropped during the same period.

Lloyd hailed these price reductions in the context of "rising fuel prices and increased vehicle excise duty rates". However, the picture for policyholders - and, indeed, people looking to take out policies - remains mixed. For example, while car insurance premiums have dropped below their price peak of 2017's second quarter, the home insurance policies remained pricier than they were a year earlier.

Expensive car insurance still a young person's game

To reach the figures, the AA used an index calculating the average price from the five least expensive provided by various insurers. The AA's research also, to reveal how offered premiums differed for customers of various demographics, referred to a fixed nationwide basket of such customers.

Young drivers still face paying the highest premiums for car insurance. For an annual comprehensive policy, the price is - on average - £1,766.17 for men in the 17 to 22 age bracket. Women in that demographic are charged slightly less, £1,505.28. The cheapest car insurance premiums are available to people aged 60 to 69, with £403 as the average quoted premium.


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Home sweet home insurance? Not entirely

On the subject of home insurance, standalone building policies saw, over a year-long period, 5.1% growth in the average premium - putting the cost at £117.47. This was despite the premium actually dropping by 0.4% during 2018's opening quarter. It was a similar story with contents policy quotes - which, despite picking up 24p in price compared to a year earlier, shed 1.5% in price in the quarter.

That translates into a saving of 89p - even deeper than the average 42p saving recently generated, on a quarterly basis, for a combined buildings and contents policy. The average quote for such insurance went up by 4.8% during the year, adding £7.36 to what became a price of £161.75. However, there was still a quarter-on-quarter price fall of 0.3%.

Meaningful reasons for cautious optimism

While the price decreases have been modest, they should still buoy up hope in both motorists and homeowners - especially those who have been consistently cash-strapped. The news of a 2% drop in the cost of the average car insurance premium since a year ago has been backed up by data from other sources including Willis Towers Watson, as reported by the Financial Times.

Rob Warner, AA Insurance commercial director, has attributed this fall partly to the Ogden rate, the originally anticipated impact of which on insurers' costs did not actually fully materialise. Though insurers initially hiked premiums in reaction to news of a change in the Ogden rate, "the full impact wasn't felt", said Warner - thus soothing insurers who had previously felt "a little bit shell-shocked".

The news of falling prices also provides some welcome respite from the doom and gloom that had previously surrounded the car insurance industry. In January, the Express reported much of the despondency after premiums had increased during 2017's last quarter.

Freddy Macnamara, who founded the pay-as-you-go insurance company Cuvva, despaired at the "absolutely crippling" expense of traditional insurance for many people. He also observed that this cost was "widely expected to hit record heights in 2018"; however, the fresh news of price drops might help to alleviate such concerns, at least temporarily.

In any case, you can still help spare yourself the worst of insurance premium hikes if you source your home or car insurance through Call Wiser. As a broker, we can compare a range of quotes before presenting one that satisfies your needs as closely as possible.

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