Recent research in the insurance industry suggests that car insurance premiums are rising sharply for the first time in three years. The average premium is up £62 compared to a year ago or 12% and that is before the increase in tax that you pay for your insurance products.
The recent announcement in the budget increased insurance premium tax from 6% to 9.5% and this will become effective from the 1st of November 2015. This will add an average of £18 onto the cost of your car insurance. The government estimates that it will increase their revenue by £1.6 billion. The effect of the rising car insurance costs and also the imminent increase in insurance premium tax will make it even more important for customers to shop about at renewal.
Research also indicates that the highest increases in Scotland would be felt in the North East and also East of Scotland. During the second quarter, customers have seen a hike of 9.2% in their premiums and this is the highest increase in the UK.
The increases in the car insurance premiums is the first significant increase in premiums since winter 2011.
In Scotland, research has indicated that premiums have increased by 4.4% over the last three months, although drivers in Scotland still pay the lowest average in the UK with premiums being an average of £392. The UK average is £600.
Drivers in Central Scotland are paying an average of £476 and this is up 5.9% compared to the previous quarter, while drivers in the Highlands and Islands are paying £429 which is a 4% increase.
What are causing the increases in premium ?
Firstly, the car insurance market still has a problem with inflated injury claims for such things as whiplash and insurers are still trying to find solutions to this and also fraudulent claims that are submitted.
The average cost of a claim continues to rise and Insurers are simply not making an underwriting profit from car insurance and many insurers have been losing money from this class of business.
Several Insurance companies have decided that they are quite prepared to reduce the number of policies that they have in place for car insurance and downsize their book in order to try and stop the losses.
Some insurance companies have decided to exit from certain distribution channels for car insurance and this has led to a reduction in the numbers of insurers who are operating in the market and therefore premiums rise.
At the end of the day, with interest rates being so low, insurers are no longer making returns that they once made on the premiums. They are therefore trying to make an underwriting profit on car insurance which is a difficult thing to achieve.
The important point to remember is always check your renewal premium for this year and compare the premium to the previous year to check to see how much the increase has been.
It is then time to shop around and check the market as you will find that some insurance companies offer an introductory discount to new customers at Year 1 and this will help you save money.
With the cost of car insurance rising it is worthwhile to take the time to check the market.
There are hundreds of different policies available on www.insurescotland.com for you to check your premium.