Factors currently influencing the cost of motor insurance in the UK
Location, no claims bonus, and type of vehicle, these factors typically influence car insurance prices. However new factors are now integral to insurer’s calculations. These changes will affect businesses and individuals across the UK.
Whether purchasing truck fleet insurance or single vehicle insurance, legislation and economics are impacting premiums right now.
Last year, gender equality laws had a bearing on the cost of insuring vehicles. This demonstrated how a law change could eat into the disposable income of individuals. This impact was also felt in the profit margins of businesses across the UK. More recently consumers have seen how an increase in insurance premium tax has added to their monthly outgoings.
In 2017 we are anticipating further changes to prices. Here are some predictions of the circumstances that may have significant weight on the calculations of insurers for both motor trade insurance and personal cover.
Brexit
The geopolitical climate is increasingly playing a role in the costs of car insurance. Insurers are striving for business as usual, but the possibility of exit from the single market presents new challenges.
The end of passporting is the most significant change underwriters will need to respond to. This has led to concerns being raised by BIBA (The British Insurance Brokers Association). They have highlighted the risk of fewer motor insurance policies available in the UK after Brexit. With less competition the laws of supply and demand could lead to predictions of higher premiums.
Value of the pound
The value of the pound is presently, regularly described as volatile. Various factors including Brexit are resulting in changeable exchange rates. A drop in the value of the pound can increase of imports from abroad.
Even for cars assembled in the UK it is reported as much 59% of car parts are imported. As such is imaginable that a repair of a vehicle will involve an import of at least one part. With the costs of imports increasing, the cost of repairs will reflect this. Unfortunately more expensive repairs correspond with higher payouts from insurers. It is inevitable any increase in costs will be added to premiums.
Ogden Case
In March 2017 there was a change in the way life changing injuries are compensated. Pay outs are calculated based on a government published document titled “Ogden Tables”. Low interest rates for investments, had to be redressed, and resulted in government changing the discount rate.
To summarise, insurers are likely to have to make larger pay-outs in such cases. The cost of this will be passed onto their customers. Both whether individuals and businesses with motor trade insurance policies will feel the impact. Due to this both insurance for individuals and insurance for motor traders are likely to increase at renewal date. It has been predicted that this is most likely to impact the cost of commercial fleet insurances.
Insurance Premium Tax
There was an increase in insurance premium in May 2017. This increased the cost of this tax to 12% and affects all policies including commercial vehicle insurance. So if your personal or business motor insurance will be renewed later this year, this will be a contributing factor to the increasing cost.
With predictions of increasing premiums it is easy to have a gloomy outlook. However it is not all bad news, the UK insurance is more competitive than ever before.
This is driven primarily by consumers focus on getting the lowest cost premiums possible. Purchasing departments for motor trade businesses are savvy when researching how to find the cheapest truck fleet insurance. With increasingly competitive markets meaning they also need to keep a close eye on the bottom line. This also contributes in insurers only succeeding by offering the best value insurance policies.
Meanwhile insurance brokers, and their associations, continue to work to get the best deals for consumers. With so many focused on getting lower cost insurances hopefully there will not be too many hikes when renewal date comes around. Insurance brokers hope this will ensure a straightforward renewal for individuals and motor trader insurance, with minimal price increases.