Car insurance costs to be driven up

Scots typically pay the lowest car insurance premiums in the UK. Picture: Getty

Car insurance costs are to climb steadily over the coming months as a sustained spell of falling premiums comes to an end. New figures show that the average cost of comprehensive car insurance edged up in the three months to the end of June, with drivers in all areas of the UK affected.

The upward trend is likely to continue, with one leading insurer warning of 10 per cent hikes in car insurance prices this year.

Scots typically pay the lowest premiums in the UK, but motorists in parts of Scotland have been hit with the biggest increases over the past three months.

Dundonians have seen an annual rise of 15.3 per cent, the biggest uptick of any city in the UK.

Those in the East and North-east of Scotland are paying almost 10 per cent more than a year ago, at £430 a year, while comprehensive car insurance policies for drivers in the Central Belt have gone up 5.9 per cent year-on-year, to £476.

Prices have also crept up for those in the Borders, although at an average of £395 a year they still pay the lowest premiums of any area of the UK.

Women drivers in Scotland have typically suffered sharper increases than men. Women aged 66 to 70 in the East and North-east now pay nearly 20 per cent more for their premiums than a year ago, on average, while those in the Borders have seen costs jump by 13 per cent over the same period.

The figures emerge from the latest Confused.com/Towers Watson car insurance price index. The quarterly index from AA Insurance, out next week, is expected to show similar patterns.

Steve Sanders, finance director at Confused.com said: “Motorists in Scotland have been hit hard by the latest annual price rises, particularly drivers in the East and North-east where premiums have risen by 9.2 per cent. However, many drivers in Scotland may take solace in the fact they have some of the lowest premiums of drivers across the UK.”

The upwards trend brings a close to a benign period in which car insurance premiums have gradually fallen. The various indices have showed year-on-year price reductions since 2011, reflecting improved competition among insurers.

Younger drivers in particular have also benefitted from the development of so-called black box technology, which by rewarding safe driving has helped some drivers to reduce their premiums.

But premiums are being driven back up again as personal injury claims add to the costs borne by insurers. Insurance companies have reported higher accident numbers and claim figures in recent months as car sales and traffic levels have rebounded.Janet Connor, managing director of AA insurance, said: “Premiums have fallen to the extent that claims costs are higher than premium income. This is clearly unsustainable and we would have expected to see premiums to rise through the rest of 2015 as a result.”

Prices will also be pushed up by an hike in insurance premium tax from 6 to 9.5 per cent, announced in the Summer Budget and taking effect in November. This could add around £17.50 to the typical comprehensive car insurance policy, according to Connor.

“The Chancellor’s view that falling premiums somehow justifies the imposition of this ‘stealth’ tax is completely without justification,” she said. “We expected premiums to rise this year but within 10 per cent. Now I think premiums are likely to rise by more than 10 per cent this year and continue to do so into 2016.”

Increases on that scale will lead those on the lowest incomes and already struggling to afford insurance to consider driving without cover, Connor added.

“That in turn can only add to upward premium pressure. This is thoroughly bad news for Britain’s motorists.”