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The AA British Insurance Premium Index (Index) has been tracking the quarterly movement of car and home insurance since 1994. It measures the market average premium (an average of all quotes on a UK-representative basket of 'customers') as well as the five cheapest quotes for each 'customer' to provide the Shoparound Index.
The information in the Index may only be used internally by the business (Internal Business Use) on the following terms. Internal Business Use means use of the information contained in the Index in reports and submissions – that do not carry advertising – in internal business activities. It specifically excludes any commercial use and exploitation including any use whereby the user obtains direct or indirect revenue, for example as part of any publishing activity, promotion, marketing or advertising. The AA copyright notice must be displayed on all such information. Press journalists may use the Index for editorial purposes without prior permission.
Any use of the Index other than as above is not permitted without the prior written consent of the AA (contact details above).
AA excludes all implied warranties and conditions to the fullest extent permitted by law. AA does not in any way warrant the accuracy or completeness of the Index and by using the Index the user acknowledges that it is relying upon its own skill in determining its suitability for any general or specific purpose and accepts that the Index may not be error free.
Automobile Association Insurance Services Limited is an intermediary and is regulated by the Financial Services Authority.
Car insurance premiums continue to fall, AA Index finds
Young driver premiums falling after two years of sustained increases
'Unfair' gender ruling as young womens' premiums rise sharply
According to the latest benchmark AA British Insurance Premium Index for the three months ending 30 September 2012, car insurance premiums are showing a downward trend.
The Shoparound Index – an average of the cheapest five premiums from directly sold policies for each 'customer' in a nationwide basket of risks – suggests that over the third quarter the average quoted cost for an annual comprehensive car insurance policy fell by 2.9% to £844. However over 12 months quotes have risen by 5.6%.
Using the same Shoparound basket of risks on price comparison sites suggests that the average premium has fallen by 1.0% to £612, a drop over 12 months of 2.3%.
Simon Douglas, director of AA Insurance, says that this is good news for customers although the averages mask wide premium extremes.
"Competition is tough in the insurance market, forcing many companies to reduce premiums despite the fact that costs show little sign of abating. Nevertheless, some are still increasing premiums.
"Motor insurance has been a focus of government attention for some time, and next year new legal reforms are expected to reduce the cost of personal injury claims and fraud. Whiplash injury claims continue to pour in, and under current legislation they are difficult for insurers to reject, even if they think they may be fraudulent, because it is difficult to prove whether or not a claimant has suffered."
A new report from the Institute of Actuaries shows that personal injury claims management companies increased their income by 21% in 2011, while the average small injury claim including whiplash is £8,400, costing the industry an estimated £400 million per year.
"The days of 'open season' for fraudulent injury claims, cash for crash and similar scams are numbered," Mr Douglas says.
Mr Douglas also points out that the insurance industry is preparing for the gender-neutral environment after a European Court of Justice (ECJ) ruling takes effect from 21 December 2012.
"Over coming weeks, most insurers, including AA Insurance, will introduce gender-neutral pricing ahead of the deadline. This will affect young female drivers most, who could see premiums rise by as much as 25%.
"Insurers are likely to be cautious initially because they won't know what mix of business they'll write after the change. They will want to avoid writing young male business at unprofitable rates, but competitive pressure will lead to premiums settling down in time. That is likely to take very many months however.
"We may now have gender equality, but that still doesn't mean that it is fair."
Young womens' premiums fall ahead of gender ruling
Premiums for young drivers (aged 17-22) have also fallen slightly, following sustained increases over the past two years which reflect the growing cost of claims involving young drivers, especially men.
Mr Douglas says: "The gap between young male and female drivers had been gradually closing, although the latest Index shows that premiums have fallen further for young women than for their male peers. It may be that some insurers are taking a longer term view of profitability, recognising that premiums will rise at renewal when they cannot reflect gender in their rates.
"Just weeks from the ECJ gender change directive deadline, young female drivers are paying on average £500 less for their cover. For new drivers, my advice to young women would be to buy their insurance as soon as they can while young men might be advised to wait until the new year, since their premiums for them are likely to fall further."
Over the third quarter, young men saw their premiums fall by 0.7% to £1,603 while those for young women fell by 2.2% to £1,127.
Drivers with telematic insurance, such as AA Drivesafe, will see less change following the gender ruling since premiums are affected more by driving performance than gender.
Regional variations
All regions saw average premiums fall, with the exception of Anglia (an increase of 1.4%, according to the Shoparound Index). Scotland, which has a legal system that discourages spurious whiplash injury claims, remains the cheapest region in which to buy car insurance with an average Shoparound quote of £438 (a fall of 0.1%); while Granada is still the most expensive £1,059 (a fall of 0.3%).
Third Party Fire & theft £830.37 £843.68 - 1.6% £803.39 + 3.4%
TPFT appears to be a higher price than comprehensive because it reflects the basket of risks, which is predominantly young drivers with older cars for TPFT
Editors may notice that the premiums quoted for July are lower than those quoted last quarter. This is because the methodology of the Index has changed which has brought premiums for both Direct and Aggregator indices more in line with reality. The percentage increases/decreases have been preserved
Home insurance premiums rising, according to AA Index
Washout summer brings home insurance premium increases
AA urges government to make flood defence investment a priority
The latest benchmark AA British Insurance Premium Index shows that over the third quarter of 2012, the average insurance quote for both home buildings and contents cover has risen following a washout summer of storms and flood.
According to the Shoparound summary, which is an average of the five cheapest quotes for each property in a country-wide basket of risks, the cost of buildings cover rose 2.4% to £181 over the three months to the end of September (5.2% over 12 months), while contents cover rose 1% to £242 (7.2% over 12 months).
Simon Douglas, director of AA Insurance, says that the wet summer, which according to the Association of British Insurers has cost insurers in excess of £400 million, is a sharp reminder that the industry must be prepared for more of the same over coming years.
The Environment Agency predicts that heavy rainfall will become three or four times more common over coming decades, increasing flooding tenfold. Meanwhile the Climate Vulnerability Monitor, a report on the worldwide effects of global warming published in September, suggests that the cost of flood damage in Britain is likely to triple by 2030.
"I am very concerned that no agreement has yet been reached in finding an affordable option to the 'statement of principles' between the insurance industry and the government, which ensures that families in flood-prone properties can continue to obtain flood cover. This expires in June next year and if no agreement is reached soon, could lead to the most vulnerable homes becoming uninsurable.
"To put this into context, insurers measure flood risk in terms of events likely to happen over a period of years. Even if a home is at risk of flooding once in a century, given that the average cost of repairing a flood-damaged property is £20,000 that is the equivalent of £200 per year, on top of the cost of covering other risks."
Mr Douglas also points out that flooding is extremely costly in terms of damage to infrastructure and disruption to the economy, as well as to families' homes; yet investment in flood defences has also fallen by more than 20%.
"It's vital that the government and local authorities make tackling the problem at source by investing in flood defences a priority.
"It's hard to think of a better return on investment."
Mr Douglas points to the £38 million that was spent on flood defences in Carlisle following devastating floods there in 2005. Last month, although some properties in the region were flooded following exceptional rainfall, the new defences kept around 1,500 homes in the city dry.
"That represents a return of at least 100% in terms of the cost of mopping up and damage to property that has been saved."
Regional trends – Shoparound Index
Buildings
Every region of the UK has seen premiums rise. The most expensive region to insure a home is London and the South East, with an average buildings premium of £200, an increase of 2.9% over the quarter. The biggest regional premium increases were Yorkshire and East Anglia, which saw premiums jump 3.5% to £177. Wales and the West Country remain the cheapest region to insure a home with an average quoted premium of £157, up 1.1% over the quarter.
Contents
The highest quoted Shoparound premium for contents cover is in the Central and North West England with at an average of £101, an increase of 0.7% over the third quarter of 2012, marginally higher than Yorkshire, which saw premiums rise 0.9% to £100. In Wales, the average Shoparound quote for contents insurance fell 0.6% to £84. The cheapest regions to insure home contents are Scotland and the West Country, each £79.
Home insurance – buildings average premiums October 2012 (table)
Home insurance – contents average premiums October 2012 (table)
Home insurance – combined average premiums October 2012 (table)
Quarterly movements for home insurance
Premium changes by region
Premium changes by age
Premium changes by property type
Premium changes by year built
Home insurance – buildings Shoparound premium trends
Home insurance – contents Shoparound premium trends
Home insurance charts – price comparison market
Home insurance – buildings average premiums October 2012 (table)
Home insurance – contents average premiums October 2012 (table)
Home insurance – combined average premiums October 2012 (table)
Premium changes by region
Premium changes by age
Premium changes by property type
Premium changes by year built
Buildings Contents Combined Comp TPFT
July 1994 market average premium £167.70 £108.66 £323.87 £348.77
July 2012 market average premium £226.87 £118.14 £309.22 £1,254.65 £1,663.16
October 2012 market average premium £231.52 £119.35 £311.39 £1,219.40 £1,594.46
July 2012 shoparound average premium £177.27 £92.14 £239.91 £870.16 £1,182.82
October 2012 shouparound average premium £181.48 £92.84 £242.42 £844.66 £1,161.76
A base rate of 100 was set at July 1994. The British Insurance Premium Index gives a quarterly update
on the movements of home insurance on 750 risks each for buildings and contents, and on 2800 car insurance risks -
2500 comprehensive and 300 TPFT. July 1994 and subsequent premiums are assumed average premiums rebased
in line with BIPI production methods over time.
The Index shows average car insurance premiums based on open market rates from 80 of the UK's leading
insurers and home premiums across 72 insurers. Composites, direct writers and online providers are included.
The quarterly move compares the market average premium this quarter with the previous quarter.
The shoparound premium is the average of the five lowest premiums quoted by the insurers in the market
survey. This more closely reflects the price paid, but does not take account of discretionary discounts offered.
All premiums shown include Insurance Premium Tax at the prevailing rate.
Premiums shown for July 1994 alone are free of IPT
While it is not possible to include risks from every town in the UK, those selected are typical risks,
reflecting a cross section of the insurance market.
AA British Insurance Premium Index quarterly moves - October 2012
Buildings Contents Combined Comp TPFT
£1
67
.70
£1
08
.66
£3
23
.87
£3
48
.77
£2
26
.87
£1
18
.14
£3
09
.22
£1
,25
4.6
5
£1
,66
3.1
6
£2
31
.52
£1
19
.35
£3
11
.39
£1
,21
9.4
0
£1
,59
4.4
6
£1
77
.27
£9
2.1
4
£2
39
.91
£8
70
.16
£1
,18
2.8
2
£1
81
.48
£9
2.8
4
£2
42
.42
£8
44
.66
£1
,16
1.7
6
AA British Insurance Premium Index quarterly moves - October 2012
July 1994 market average premium July 2012 market average premium October 2012 market average premium July 2012 shoparound average premium October 2012 shouparound average premium
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AA British Insurance Premium Index market average trends since 1994
Motor Comp Motor TPFT
Home Buildings Home Contents
Motor direct market summaries
AA British Insurance Premium Index
Comp TPFT
July 1994 market average premium £323.87 £348.77
July 2012 market average premium £1,254.65 £1,663.16
October 2012 market average premium £1,219.40 £1,594.46
July 2012 shoparound average premium £870.16 £1,182.82
October 2012 shoparound average premium £844.66 £1,161.76
A base rate of 100 was set at July 1994. The British Insurance Premium Index gives a quarterly update
on the movements of 2800 car insurance risks - 2500 comprehensive and 300 TPFT. July 1994 and subsequent premiums
are assumed average premiums rebased in line with BIPI production methods over time.
The Index shows average car insurance premiums based on open market rates from 80 of the UK's leading
insurers. Composites, direct writers and online providers are included.
The quarterly move compares the market average premium this quarter with the previous quarter.
The shoparound premium is the average of the five lowest premiums quoted by the insurers in the market
survey. This more closely reflects the price paid, but does not take account of discretionary discounts offered.
All premiums shown include Insurance Premium Tax at the prevailing rate.
Premiums shown for July 1994 alone are free of IPT
While it is not possible to include risks from every town in the UK, those selected are typical risks,
reflecting a cross section of the insurance market.
AA British Insurance Premium Index quarterly moves - October 2012
Comp TPFT
£3
23
.87
£3
48
.77
£1
,25
4.6
5
£1
,66
3.1
6
£1
,21
9.4
0
£1
,59
4.4
6
£8
70
.16
£1
,18
2.8
2
£8
44
.66
£1
,16
1.7
6
AA British Insurance Premium Index quarterly moves - October 2012
July 1994 market average premium July 2012 market average premium October 2012 market average premium July 2012 shoparound average premium October 2012 shoparound average premium
AA BIPI quarterly average premium movement by Age and Gender - Aggregator October 2012
Market
Shoparound
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%A
ngl
ia
Bo
rde
r &
Tyn
eTe
es
Ce
ntr
al
Gra
nad
a
Lon
do
n
Sco
tla
nd
Sou
th
Wal
es
We
st &
We
st C
ou
ntr
y
Yo
rksh
ire
UT
V
AA BIPI quarterly average premium movement by ITV Super Regions - Aggregator October 2012
Market
Shoparound
Home direct market summaries
AA British Insurance Premium Index
Buildings Contents Combined
July 1994 market average premium £167.70 £108.66
July 2012 market average premium £226.87 £118.14 £309.22
October 2012 market average premium £231.52 £119.35 £311.39
July 2012 shoparound average premium £177.27 £92.14 £239.91
October 2012 shoparound average premium £181.48 £92.84 £242.42
A base rate of 100 was set at July 1994. The British Insurance Premium Index gives a quarterly update
on the movements of home insurance on 750 risks each for buildings and contents. July 1994 and subsequent premiums
are assumed average premiums rebased in line with BIPI production methods over time.
The Index shows average home insurance premiums based on open market rates from 72 of the UK's leading
insurers. Composites, direct writers and online providers are included.
The quarterly move compares the market average premium this quarter with the same quarter last year.
The shoparound premium is the average of the five lowest premiums quoted by the insurers in the market
survey. This more closely reflects the price paid, but does not take account of discretionary discounts offered.
All premiums shown include Insurance Premium Tax at the prevailing rate.
Premiums shown for July 1994 alone are free of IPT
While it is not possible to include risks from every town in the UK, those selected are typical risks,
reflecting a cross section of the insurance market.
AA British Insurance Premium Index quarterly moves - October 2012
Buildings Contents Combined
£1
67
.70
£1
08
.66
£2
26
.87
£1
18
.14
£3
09
.22
£2
31
.52
£1
19
.35
£3
11
.39
£1
77
.27
£9
2.1
4
£2
39
.91
£1
81
.48
£9
2.8
4
£2
42
.42
AA British Insurance Premium Index quarterly moves - October 2012
July 1994 market average premium July 2012 market average premium October 2012 market average premium July 2012 shoparound average premium October 2012 shoparound average premium
The information may only be used internally by the business (“Internal Business Use”) on the following terms.
Internal Business Use means use of the information contained in the Index in reports and submissions, that do not carry advertising, in internal business activities.
It specifically excludes any commercial use and exploitation including any use whereby the user obtains direct or indirect revenue,
for example as part of any publishing activity, promotion, marketing or advertising. The AA Copyright notice must be displayed on all such information.
Press journalists may use the Index for editorial purposes without prior permission.
Any use of the Index other than as above is not permitted without the prior written consent of the AA (details below).
AA excludes all implied warranties and conditions to the fullest extent permitted by law. AA does not in any way warrant the accuracy or completeness of
the Index and by using the Index the user acknowledges that it is relying upon its own skill in determining its suitability for any general or specific purpose
and accepts that the Index may not be error free.
Automobile Association Insurance Services Limited is an intermediary and is regulated by the Financial Services Authority.
For further information, please contact Ian Crowder, telephone 01256 492 844 or email [email protected].