Car Insurance Costs Face Two Increases in 2017
Car insurance seems to be on a never-ending ascent to destination unaffordable. More rises have been announced that could add a further £50-£75 to every policy.
In the Autumn Statement of 2016, Philip Hammond announced Insurance Premium Tax was going to rise by 2% from 10% -12%. The effect is expected to be an added £10 per year to car insurance, much to the annoyance of drivers everywhere who have already experienced average rises of 52% over the past 10 years. These rises will take effect from June 2017 this year.
Now, Justice Secretary Liz Truss has announced changes that took effect from March 20th this year that will increase car insurance further, creating a double whammy of price increases for drivers.
The changes on March 20th relate to the way lump sum compensation payments are calculated in all claims, not specifically for car insurance claims. When a victim is awarded a lump sum, that money could be invested and earn interest. To be fair to insurers the amount is reduced using the ‘discount rate’ to reflect this added value. The current discount rate has not been amended since 2001 and so does not reflect the current economic climate. To correct this Liz Truss will drop the rate from 2.5% to -0.75%. the impact of this change will mean victims will receive larger lump sums of compensation than before and so insurers will have to accommodate this cost, which will likely to be passed onto consumers.
The change in the discount rate is expected to increase insurance premiums by £50-£75 per year. Currently the average price of a fully comprehensive car insurance premium is £767 per annum, but this isn’t the highest average cost we have ever had, in 2011 the average cost reached highs of £858. The combination of two price rises has led experts to believe there is a possibility 2017 could set a new record for highest average car insurance costs.
The Rivervale Vehicle Leasing Team has created a list of car insurance do’s and don’ts to help you keep your costs low…
Shop around! The prevalence of comparison websites has made it easier than ever to make sure you are getting a good deal – Use them!
Protect your no claims. It might add a few more pounds to your policy but when you consider a no claims discount can save you up to 90% on your policy a few more pounds seem worth it!
Consider using a ‘black box’. These telematics devices monitor how harshly you break, the speed at which you travel and monitors cornering to assess how safely you are driving. It will also monitor the times of day you are travelling, as travelling at rush hours is considered to be more hazardous. This allows drivers to show insurance companies they are driving safely and so can reduce insurance costs. This is particularly useful for young drivers who do not have any no claims years to demonstrate their driving behaviour.
Try to pay for your insurance in one lump sum. Most insurers will charge more if you opt to pay by a monthly direct debit.
Clear out your garage! It is possible to reduce the cost of insurance if your car is safely locked away at night, this is seen as less of a risk than leaving a car parked out on the street where anyone could get to it!
Consider the excess you are willing to pay. You could reduce your insurance cost slightly by agreeing to pay a higher level of voluntary excess. Be warned – you must actually be able to pay this amount should the worst happen and you need to make an insurance claim.
Consider how you are describing your job title. You could try out a few on comparison sites. Different job titles appear to create different car insurance prices. For example, if you are a ‘music teacher’, try ‘teacher’ as well and see if there is any difference reflected in price.
Pick a vehicle that belongs to one of the lowest insurance groups. The lower the insurance group number the lower the insurance cost is likely to be. Examples of cars in the lowest insurance groups are: Toyota Yaris, Kia Rio, Renault Twingo, Vauxhall Corsa, Ford Ka+, Volkswagen Up, Hyundai i10, Skoda Citigo and the Seat Mii.
Be tempted to drive without car insurance. The penalties for this are a fixed penalty of £300 and 6 points on your licence. If the case goes to court a driver without insurance could face disqualification and an unlimited fine. In some cases, the police have the authority to seize your vehicle and even destroy it.
Put everyone on your policy. Adding additional drivers means additional cost. If there are people on your insurance policy who rarely drive your car is it worth them being there?
Be tempted to put yourself as a main driver when you are not. The most common situation for this to occur is when a teenager passes their driving test and faces huge insurance costs. A well-meaning parent then puts themselves as the main driver of a vehicle they hardly ever use and the child who uses the vehicle everyday as a named driver to reduce costs. This is called ‘fronting’ and is a type of fraud.
Get points on your licence. If you are caught speeding, talking on your phone or any other offence that could result in points on your licence there will be an impact on your insurance costs. Drivers who have received points are seen as being riskier than those who do not, so the insurance cost rises. If you do receive points on your licence you must immediately inform your insurance company. Failure to do this would result in your insurance policy being invalid, which could leave you in a very tricky situation should you then need to claim.
Do you think car insurance costs have spiralled out of control?
The comments above do not necessarily reflect Rivervale's views unless clearly stated.
8 March 2017
Written by Natalie Faughy