PricewaterhouseCoopers (PwC) is predicting that car insurance premiums could fall by an average of £50, with drivers in England and Wales seeing a 5% decrease. This forecast comes after the Government’s Actuary Department updated the personal injury discount rate (PIDR) from -0.25% to +0.5%, taking effect from January 11. The PIDR is used to calculate compensation for personal injury in accidents and is reviewed every five years. With the increase in the PIDR by 0.75 percentage points, insurers may pass on higher compensation payouts in the form of higher premiums, but the updated rate is expected to result in lower premiums for drivers.
According to the Association of British Insurers (ABI), the average cost of car insurance was £612 in the most recent quarter, down 2% from the previous quarter. Despite this decrease, insurance costs were still £50 higher than the same period in 2023. Mohammad Khan, head of general insurance at PwC UK, emphasized that the upgraded PIDR is positive news for drivers, as insurance premiums have increased by over 20% in the past two years. However, with the direction now shifting and costs starting to reduce, motorists can expect a reprieve in insurance premiums.
In response to the escalating costs of insurance, the Government announced in October the formation of a taskforce aimed at addressing the issue for drivers. Analysis conducted by the Financial Conduct Authority found that motor insurance premiums had risen by an average of 21% since June 2022. The government is collaborating with industry groups, consumer advocates, and insurers to identify strategies to reduce insurance costs. Factors contributing to the rise in car insurance expenses include inflation, increased car thefts, and deteriorating road conditions.
Former transport secretary Louise Haigh underlined the importance of affordable car insurance, stating that it is essential for accessing economic opportunities. The government is committed to controlling costs and has initiated direct efforts to tackle the increasing insurance expenses. Motorists are encouraged to take steps to minimize insurance costs, such as parking vehicles in garages or driveways to reduce the risk of damage or theft. Paying annually rather than monthly can also lead to overall savings, while installing safety devices in cars and increasing voluntary excess can help lower premiums.
Car insurance coverage is essential for providing compensation in the event of theft, damage, fire, or accidents involving vehicles. It protects against damage caused to other individuals, their property, or the public. Only in instances where the accident is the driver’s fault is a claim made on car insurance. Failure to have car insurance can result in fines up to £1,000 and potential vehicle seizure and destruction. Vehicles can be exempt from insurance requirements if classified as “off-road” and kept on private land with a statutory off-road notification (SORN), excluding them from public roadways.
