Will your car insurance go up in 2020? In a nutshell, probably. According to analysis from insurance comparison site Confused.com car insurance prices have now hit an average of £815 for comprehensive cover.
If you live in Central London, your car insurance premiums have increased the most to an average of £1,260. In Greater Manchester you can expect to pay an average of £1,053 for car insurance cover. Good news for those of us who live in the Scottish Borders though who saw the smallest increase in premium prices with a minimal one percent increase. It is the South West who were found to be the cheapest region in the UK for car insurance costs with an average price of £595 for comprehensive cover.
Here are 5 reasons car insurance premiums will increase in 2020. - Remember, the premiums of the many pay for the claims of a few and for the following reasons you can expect an increase in 2020 even if you are claims free, have low mileage and are a low-risk customer.
A report published by ERS recently advised that in November 2019 Ernst & Young analysed the performance of the UK motor market. 2017 and 2018 were the first two consecutive years of profit for the motor insurance market in the last 40 years. However, in 2019 many insurers hadn’t increased their rates enough to cover claims inflation.
Yes, insurers have insurance costs too. Reinsurance. It has been suggested that market increases are up to 30%. There are also less re-insurers providing motor capacity, so prices have increased due to less competition.
All insurers pay an annual fee (a percentage of each insurer’s premium) to the MIB which contributes to a central fund that provides compensation to people involved in accidents with motorists that are either uninsured of that can’t be traced. The Ogden discount rate also applies here – more about that later. In 2020, the MIB levy is set to increase by 18% to £404m. Therefore, all insurers will have to account for an increase in their expenses.
The Ogden discount rate is a calculation used to determine how much money insurance companies should pay as compensation to people who have suffered life-changing injuries so that it will cover all their predicted future losses. The settlement amount agreed aims to reflect the claimant’s future loss of earnings, as well as covering any care costs. However, because it is paid in a lump sum which will be invested when it is received, the amount is adjusted to account for the interest they would expect to earn, which is where the Ogden discount rate comes in.
Last year the Government reduced the discount rate from +2.5% to -0.75%. This means that the pay-out due to a claimant will be much higher than the same settlement would have been at the old rate. As such insurers will raise insurance premiums in order to make back the extra money they will now have to payout. Huw Evans, Director General of the Association of British Insurers (ABI), said that:
“Claims costs will soar, making it inevitable that there will be an increase in motor and liability premiums for millions of drivers and businesses across the UK. We estimate that up to 36 million individual and business motor insurance policies could be affected in order to over-compensate a few thousand claimants a year.”
Vehicles have become more technical: bumper sensors, front and rear cameras and video wing mirrors as some examples. This means that they are becoming a lot more expensive to repair.
We can certainly give you a quotation for your car insurance, although we are not always the most competitive against the price comparison websites. If you are ‘driven’ by price, online is probably the best way to source a quotation. If you would prefer to have someone to talk to, have a dedicated claims department that work hard on your behalf should the worse happen, or if you don’t like operating a computer to obtain quotations then we would be delighted to assist you.
Where we can offer more productive and effective help is for the higher value cars. If you have a car(s) worth £30,000 and above, you may wish to have a more flexible bespoke policy that has relevant unique covers. Likewise, you may own a classic car(s) which would benefit from a more specialist type of cover. This is something we can help you with. So please don’t hesitate to get in touch.
Private Clients Development Executive