‘LASPO effect’ bringing car insurance premiums down, says survey

Insurance: complex picture behind fall in rates

Motor insurers “appear to be taking a gamble” on the claims cost savings that may arise from the personal injury reforms as premiums continue to fall, it was claimed yesterday.

According to the Confused.com car insurance pricing index, in association with Towers Watson, average comprehensive premiums fell by 3.9%, the equivalent of £26 per policy, in the third quarter of 2013.

This means that the average cost of a comprehensive policy has fallen by 13.9%, or £105, in the last 12 months, to £652. It said premium levels have not been this low since March 2010. Over the same period, the average third party, fire and theft premium has fallen 6.5% to £1,057.

The index is compiled using anonymous data from all enquiries submitted on Confused.com. The prices used for analysis are based on an average of the best five quotes received.

Claimant lawyers have long expressed scepticism that premiums would fall post-LASPO, while the government said it would be monitoring the situation closely.

Comprehensive cover prices have now fallen in eight of the last nine quarters, and Towers Watson said that most of the recent decreases are attributable to implementation of the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) and the cut in RTA portal fees.

However, Stephen Jones, UK general insurance pricing leader at Towers Watson, said the picture was more complex: “Already we’ve seen a number of senior figures within the industry suggesting that some may have placed too big a bet on LASPO and the other reforms.

“But there are other factors at play here. For younger drivers, an increasing number of telematics offerings are driving down average premiums, whilst for mass-market risks, data enrichment is providing a basis for more confident, targeted price reductions. On the basis of these trends, we’d expect to see the cheapest premium measures to keep on falling, but with increasing price dispersion.”

Further evidence of the ‘LASPO effect’ was said to be apparent within regional price movements. In Manchester and Merseyside, areas which had the highest concentration of claims management companies prior to LASPO, average comprehensive premiums fell by nearly 7% in the third quarter.

Gemma Stanbury, head of motor at Confused.com, said the results were “great news for most motorists as their average premium is now more than £191 cheaper than it was two years ago… We would recommend that motorists take advantage of falling prices, rather than simply accepting their renewal price.”