Reforms to whiplash insurance payouts to stamp out bogus claims have helped to push down car insurance premiums by £100 in the past three months, according to the price comparison site Comparethemarket.com.
Whiplash claims cost the motor insurance industry £2bn a year, but new legislation will “ensure spurious or exaggerated whiplash claims are no longer an easy payday”, according to the Ministry of Justice.
The legislation, which has received royal assent, will not come into force until April 2020 but according to Comparethemarket, insurers have already started to reduce premiums in anticipation of lower payouts.
However, it said the decline in premiums was not due entirely to whiplash, and may also be down to a drop in car registrations in recent years: strong competition among insurers chasing fewer overall drivers was helping to lower premiums.
Comparethemarket said the average car insurance premium in December last year was £790 but has since fallen to £690.
The Civil Liability Act was passed in December and will change the way whiplash claims are calculated. As part of the bill, the government also agreed to reform the rates used to calculate large payouts in serious personal injury claims, otherwise known as the Ogden rate.
Dan Hutson, the head of motor insurance at Comparethemarket, said the price falls were the first bit of good news for British motorists in a long time.
“Insurance prices have been on a relentless upwards march since 2012,” he said. “The reductions have been aided by the reduction in the number of car registrations in the past six months, which suggests that insurers are having to compete more to win a larger share of a smaller market. With the review of the Ogden personal injury discount rate now under way, there is hope for motorists keen to see further reductions of their premiums.”
The overall findings were echoed by the insurer Saga, which said its profits had been hit by fierce competition in the motor and home insurance market.
It confirmed that car insurance premiums had been pushed down, in part by changes in the Ogden rate.
Saga has hoped to restore its car insurance fortunes by offering three-year motor policies promising the same price provided the user doesn’t make a claim. It wants to sell more policies direct rather than relying on price comparison websites.
Comparethemarket said a gap of £116 remained between the cheapest and average premiums over the last quarter and that shopping around was still the most effective way to save money on car insurance.
For motorists between the ages of 17 and 24, the difference was the most marked, with the average young person able to save £263 by switching to a better deal, it claimed.