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ABI launches UK quarterly motor insurance tracker showing falling premiums

Comprehensive motor insurance premiums in the UK fell by 8.9% or £36 on average last year to £374, according to Association of British Insurers (ABI) data released at a press conference this morning in London, UK, designed to launch their new quarterly car insurance tracker. 

The new quarterly average motor premium tracker collects data from the ABI’s 36 members in the UK and records the amount people actually pay for comprehensive insurance when taking out or renewing UK car insurance policies, rather than the quoted prices used by rival trackers from the AA and the Towers Watson car insurance price index, sponsored by Confused.com. 

“We see our new tracker as complimentary,” said Shaun Flanagan, heads of statistics at the ABI during this morning’s press conference in London, UK, when questioned about the need for another tracker product. “You can get a better picture by using all available data and this is different in that it measures what people actually pay. We are trying to bring extra clarity to the marketplace.” 

News Analysis: Data Shows Consumers Shop Around in Competitive Market
The ABI first data release also showed that 81% of people in the UK brought motor insurance only after spending time comparing prices before buying. They used a combination of comparison websites, phones, internal websites, brokers and other methods to try to find the best deal.

Tom Woolgrove, managing director of the personal lines business at the large UK insurer, Direct Line Group, said at the press conference that he considered this indicative of a competitive marketplace, citing comparative data that showed UK consumers were less active in comparing the cost of their energy suppliers (77%)  or mobile phone provider (64%), than their car insurer (81%).   

The Competition Commission (CC) is currently holding an inquiry into motor insurance costs in the UK, which rose dramatically from 2010 onwards before falling back in this last year. The ABI tracker highlights the fall in bodily injury and whiplash claims as one contributing factor towards the price fall, and says it looks forward to continuing to work with the UK government on public policy initiatives such as the one designed to cut erroneous whiplash claims. “We also understand the current cost of living debate in the UK,” said Woolgrove but “premiums follow claims” he stressed, and in order to help prices continue to fall more such public policy work was required. 

Telematics and Technology
“Telematics can deliver savings too,” added Woolgrove, referring to the dynamic pricing of car insurance based upon usage, time, age and so forth, although this data is not separated out in the ABI’s new tracker. The methodology could dramatically cut costs for some drivers in the future, although not perhaps for young drivers out driving late at night, which are traditionally considered ‘at risk’ and priced accordingly. The college school commute could, however, come in cheaper with dynamic telematics linked to GPS data.   

The nexus between dynamic real-time pricing technology, public policy, and effective risk and data measurements should be assisted by the extra data from the new ABI quarterly car insurance tracker. With its 36 contributing members representing 90% of the UK marketplace the information will certainly be comprehensive. As Woolgrove himself stressed, however, pricing ultimately always comes down to three key things.

• Expected claims costs per customer
• Insurers’ expenses
• Margin. 

The interplay between the above three eternal fundamentals will no doubt form a key part of the CC inquiry this year into the UK private motor insurance market, as will the debate about gender risk differences, but it will be interesting to if the growing role of dynamic pricing technology will also be assessed. Watch this space.  

• To find out about different insurance, investment and risk sectors please read bobsguide's earlier report on the World Economic Forum's (WEF) Global Risk Report 2014, highlighting weather, tech outage / cyber-criminals, and inequality gaps, as key economic risks that could impact the insurance and wider financial services sector and general economy throughout this year.