Fully-comp car insurance quotes coming down, but at what price?

The AA has reported that average quotes for fully comp car insurance have actually decreased for the first quarter of 2013.  After the insurance sector has been vilified by the public, trade associations and government, this is welcome news.

However, with every silver lining thrown out by the car insurance industry, there’s usually a huge black cloud above it waiting to break. This snippet of a headline comes likewise with the forecast of precipitation elsewhere.

Last week, we alluded to the fact that drivers, especially young drivers or those with penalty points on their license, may be justified in comparing fully comprehensive car insurance to get a cheaper deal than on a TPFT alternative, historically cheaper, given their circumstances.

Why is cheap fully comp insurance available, when TPFT is so expensive?

The report from the AA highlighting car insurance prices based upon its pricing index adds momentum to that claim. It also sheds more light onto why TPFT is going in the opposite direction, facilitating this anomaly.

The average fully comp quote in the first quarter of 2013 attracted a premium of £747, representing a reduction of 1.4% since the beginning of January and an even bigger fall, 4.1%, on the year-on-year premium.

What’s more, there’s an indication that this trend may continue. But only for fully comprehensive car insurance premiums at this stage.

Third Party Fire & Theft quotes seem to creeping up in the opposite direction.

The average quote of £1,128 for TPFT cover represents almost a full 1% rise year on year and a 2% increase on similar quotes since the beginning of the year.

Underlying reasons for car insurance anomalies

One reason cited for Third Party Fire & Theft insurance increasing is reduced competition in the marketplace for the product.

TPFT is still very much the first choice of young drivers learning the ropes in old cars and drivers who have accrued points on their license.

This has become such a slippery slope that many insurers are simply no longer offering TPFT. To anyone.

This has left the door ajar for those continuing to offer an alternative to fully comp to increase their rates by the degree we see in the AA’s first quarter 2013 figures.

There’s a lot more going on behind the reduction of fully comp than initially one sees on the surface.

The December introduction of EU legislation that women shall no longer be offered a cheap car insurance quote compared to their male counterparts is having an impact.

Although the initial thought was that all premiums would rise to the male equivalent, it’s now obvious that insurers are looking at the potential customer base as a whole, rather than by gender.

As a result, they feel they can gain a competitive edge by flatlining their price across both sexes whilst retaining a similar profit margin, with the added bonus that female drivers make up a larger proportion of this sector than ever.

Capping of injury solicitors fees bringing premiums down

Another major impact has been the introduction of the capped fees personal injury solicitors can claim for smaller RTA/whiplash injuries.

Despite complaints lodged by law groups, the decision to uphold the £500 maximum for small claims has meant that insurers do not have to set aside as much from their income to cover potential costs.

As the figure of seven in ten crashes resulting in a claim, spurious or otherwise, reduces – and it will, when solicitors are forced to stop offering 100% compensation due to their smaller fees – the forecast is that fully comp insurance will decrease in tandem.

When drivers applying for car insurance have their records cross-referenced with the DVLA next year, it’s hoped that fraudulent behaviour resulting from applications not being entirely truthful will add more income to the insurers bottom line.

At present, the number of applications falsified in this matter is estimated at almost a quarter. This could eventually mean that Third Party insurance may also begin to come down in the mid- to long-term.

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