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Insurance industry

UK Motor Insurance Premiums Set to Rise Amid Industry Shift

Strategic Insights

— 2 min read

The UK motor insurance industry is expected to undergo significant changes in 2006 and 2007, with many insurers announcing premium hikes and new market entrants making waves. Norwich Union's recent 16% to 40% hike in motor insurance premiums, depending on a driver's claims history, has sent shockwaves through the industry, with other insurers expected to follow suit. The Post Office has entered the market aggressively, offering a £50 cashback for policyholders, and competitors like First Direct and HSBC's online bank are guaranteeing to beat customers' existing premiums.

Key Takeaways:

  • Norwich Union's premium hike, from 16% to 40%, depending on a driver's claims history, has set a trend for other insurers, with many expected to follow suit.
  • The Post Office has entered the market aggressively, offering a £50 cashback for policyholders, and has been named the number one insurer on many occasions by leading financial website moneysupermarket.com.
  • Sheilas' Wheels, a women-only insurance brand, sold over 100,000 policies in its first year and promises to save an average £203 per year for customers.
  • Claims inflation has been outstripping premium increases for some years, with major players like Barclays, Liverpool Victoria, and First Direct entering the market with bold plans.
  • The average annual UK motor premium is £449, with comprehensive cover costing £772, according to the AA Insurance.
  • The industry is expected to see a 1.4% rise in comprehensive premiums in the third quarter and a 4.26% rise in third-party cover, mainly due to fear of taking new business from young, accident-prone drivers.
  • Norwich Union's move has had little effect so far, with the Post Office's aggressive pricing pushing the insurer out of top spot, according to moneysupermarket.com's shop-around index.

Statistics:

  • The industry is expected to pay out more on claims and admin than they collect in premiums in 2005 and 2006, largely due to soaring bills for personal injuries and vehicle repairs.
  • Norwich Union's claims costs are expected to absorb 109% of premium income in 2006.
  • The average cost of comprehensive cover is £772, with the AA Insurance putting the peak at £777 in January 2004.
  • The Post Office's research shows drivers could save up to £134 a year by shopping around and choosing a more competitive insurer.
  • First Direct's guarantee to beat customers' existing premiums can shave almost 7% off the average annual UK motor premium.
  • The AA's shop-around index of the lowest three premiums showed a 1.35% fall in the cost of comprehensive cover in the last quarter.

Sources:

  • "Norwich Union Announces 16% to 40% Hike in Motor Insurance Premiums" by Jeremy Gates
  • "Post Office Car Insurance Enters Market Aggressively" by Phil Ashkuri, Post Office Car Insurance
  • "Sheilas' Wheels Sells Over 100,000 Policies in First Year" by Richard Mason, moneysupermarket.com
  • "Barclays Enters Market with Bold Plans" by Unnamed Source, Barclays
  • "First Direct Guarantees to Beat Customers' Existing Premiums" by Unnamed Source, First Direct
  • "AA Insurance Survey Shows 1.4% Rise in Comprehensive Premiums" by Ian Crowder, AA Insurance
  • "Esure Welcomes Norwich Union's Premium Rise" by Adrian Webb, Esure.

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