Car and home insurance costs hit record low

By Kate McCann

Car and home insurance premiums have fallen dramatically since 2012, a major survey has revealed.

Research conducted by the AA shows record falls in the cost to consumers, including £100 sliced off motoring premiums in the last two years alone.

But Simon Douglas, director of AA Insurance, warned that prices would not continue to fall in 2014. "These record falls come despite continuing rises in the cost of personal injury claims and reinsurance costs," he said, adding: "The falls are a combination of both the fiercely competitive nature of the market as well as the as-yet unfulfilled anticipation that law changes will weed out costly fraudulent whiplash injury claims."

According to the research, the average comprehensive car insurance policy now costs £533, compared to £620 a year ago and £854 two years ago.

The average price to insure the contents of your home is the lowest it has ever been since the AA began its index in 1994, at £65 for a year. This is despite the recent bad weather and flooding that has hit parts of the country hard.

But the AA is warning that such a large drop in prices could mean problems for the industry, as technological advances which have prompted competitive pricing have not yet materialised.

"It’s as if premiums are on a helter-skelter slide. I fear that the downward spiral will end with a bump," Douglas warned. "My biggest fear is that the falls are too great, premiums will bounce sharply up again later in the year. That would not be good for the reputation of the industry. It would confound Ministers who have been taking some of the credit for falling premiums. And it will perplex drivers who thought that premiums were returning to a more realistic level," he added.

Motorists are set to see even greater reductions in policy costs in the coming year, regardless of competition, as the industry introduces a new scheme designed to cut fraud and error. ‘My Licence’ will see people hand over their licence number to insurers and could cut costs by up to £15 per driver.

Source City AM