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Insurance Premiums in Free Fall

In 2018, the average car insurance price within the UK has fallen at its fastest annual rate in more than 4 years. Two of the largest insurance providers have estimated that car insurance premiums decreased by 11% on average over the past 12 months, ending June 2018 to £752. This drop will not be seen as positive news to motor insurance providers. Shareholders will be placing further pressure on providers until it’s clear how much this will affect share prices and to what extent within the industry in the months to follow.

Between April 2018 to June 2018, shares in three of the leading insurance providers have fallen between 7 to 15 percent. This is according to recent data from Graham Wright of S&P Global Market Intelligence, a personal insurance pricing specialist. Ongoing conditions are making it increase difficult for motor insurers. The combination of falling premiums and strong competition in the marketplace will hurt some more than others. Fortunately, this is good news for consumers especially when the cost of living has increased exponentially over the past 5 years.

These ongoing challenges will be in addition to repair cost pressures within the sector. Insurance providers have already priced in the benefits for government legislation implemented to reduce the overall cost of personal injury claims, this is one of many ways that premiums have been reduced. Brexit could delay the passage of The Civil Liability Bill, disclosed in March and is making its way around parliament. The implementation date could be pushed further away from April 2019.

Car insurance premiums have steadily risen between June 2014 and June 2017. This trend was reversed due to proposal reforms in the way that large personal injury claims are now calculated across the industry. The system used for making smaller whiplash claims has also been effective.

The fall in premiums could further extend beyond the expected fall in cost per claim. Analysts warn that market cycles inadvertently over estimate their growth in the field. Additionally, they expect most listed insurers to be reserved in their guidance within the market for the upcoming mid-year results.

After a robust 2017, many expected that it was going to be inevitable, that 2018 brought with it its own challenges for the motor insurance industry. However, the sector has produced its best underwriting results in more than 24 years, according to new data obtained from EY. Once more, due to the uncertainty over reforms process within personal injury compensation and increasing prices within the first 6 months of the year.