Premium Drivers Report June2015

Introduction

The third Premium Drivers report from , which analyses the difference between the "cheapest" and "average"1 motor premiums, comes at a time when motor insurance prices are starting to come under some pricing pressure. Certainly, some industry experts are predicting that the long days of falling premiums may be coming to a close and that, as the days shorten over winter, so too will the odds on prices rising in the future.

The average cheapest clickthrough2 price for motorists

Whichever way we look at premium data, it is clear that the

comparing insurance quotes on

downward trend in prices that we've seen over the past two

has risen month on month since August 2014, climbing from

years is being put under severe strain and, as this report will

?441.90 to ?469.95 at the end of November. This can be

show, there are signs that average premiums in particular (as

attributed to a wide range of factors, not least accounting for

opposed to cheapest premiums) are beginning to rise sharply.

pricing seasonality ? motor insurance premiums tend to rise

in the last quarter of the calendar.

The "Savings Variable:

The Premium Drivers index analyses the monthly percentage

However, several indicators suggest that this uptick in

difference ? or the "savings variable". as it is referred to in this

premiusm is different to last year and cannot be wholly

report ? between the cheapest and average quote across all

attributed to seasonal differences. In the most recent

age groups. This is tracked throughout the year and compared

iteration of its British Insurance Premium Index, the AA

quarter on quarter. This "savings variable" tellesus something

revealed that average premiums had risen by ?6 over Q3

about current and historic prices, it also provides insight into

2014, the first rise since early 20123. It also found that

the motor insurance sector. It also highlights cyclical trends

P re m i u m average quotes across the majority of age groups had risen

sharply too, indicating that competition is falling.

and allows to make statistic-driven predictions on the future direction of the motor insurance market. If the difference between the cheapest and the

an interesting pattern is emerging in the premium data,

average price is narrowing, it is a contracting market; if the

Drivers showing that premiums remain slightly cheaper that at this

point last year, but are certainly now more expensive than they were in June 2014. 's date shows

price disparities are widening, then it is a dispersing market.

that clickthrough average cheapest premiums4 in November

2014 are 3% cheaper than they were back in November 2013,

which equates to a fall of ?16.92 year on year. Data released

from th eABI in October indicated that premiums were still

lower than they were in the previous year, but also showed

that the rate of decline in the cost of premiuAmsqisulaevretliengrloyff,motor insurance

as the amount that premiums are falling in percent"agseatverimnsgs index" by

year on year, according smaller5. However, this

to its data, report will

is getting show that



rising month on month since August 2014.

June 2015

"The average cheapest clickthrough2 price for motorists comparing insurance quotes on has risen month on month since August 2014"

1 The average price is calculated by taking the top five cheapest motor insurance quotes on , across all age groups. 2 Clickthrough ? when customers clickthrough from 's motor insurance quote page to the insurer whose premium

they wish to purchase. 3 4 Average cheapest premium across all age grouos. 5 See chart via the following link, which shows that year on year prices falls have been narrowing in percentage terms since Q2 2013:





Introduction

The fith Premium Drivers report from , which analyses the difference between the "cheapest" and "average"1 motor premiums, comes at a time when motor insurance policies are facing sustained upward pressure on pricing.

For the past six months, has been warning motorists that they are facing a slow but consistent uptick in the cost of insuring their vehicles.

In the December 2014 edition of Premium Drivers, 's data showed that the average cheapest clickthrough price for motorists comparing insurance quotes was on the rise2. There was also considerable evidence to suggest that this could not be attributed simply to pricing seasonality.

This was confirmed in the fourth iteration of the Premium Drivers report in March 20153. It showed that, although the peak average cheapest price of ?503.45 recorded at the end of December was not sustained in the early part of the New Year, prices did not fall as far in January and February as in previous years. In March 2014 the average cheapest clickthrough price had fallen to ?448.91 ? down from ?511.92 in December 2013. By comparison, in March of this year, the average cheapest clickthrough price registered by was ?476.66.

The bad news for motorists is that the cost of insurance policies has continued to creep up this year for all age groups apart from 17-20 year olds. By the end of May, the average cheapest price stood at ?493.77, which is just shy of December's high water mark of ?503.45. This should leave motorists and commentators in little doubt ? premiums are rising and competition is falling. Those looking to renew their policy could be in for an unpleasant surprise, particularly when they get their renewal notice through from their existing insurer, our report shows it is likely to be larger than last year's quote.

The "Savings Variable": The Premium Drivers index analyses the monthly percentage difference ? or the "savings variable", as it is referred to in this report ? between the cheapest and average quote across all age groups. This is tracked throughout the year and compared quarter on quarter. This "savings variable" tells us something about current and historic prices, it also provides insight into the motor insurance sector. It also highlights cyclical trends and allows to make statistic-driven predictions on the future direction of the motor insurance market. If the difference between the cheapest and the average price is narrowing, it is a contracting market; if the price disparities are widening, then it is a dispersing market.

"Those looking to renew their policy could be in for an unpleasant surprise, particularly when they get their renewal notice through from their existing insurer, our report shows it is likely to be larger than last year's quote."

1 The average price is calculated by taking the top five cheapest motor insurance quotes on , across all age groups. 2 See 's December 2014 edition of its Premium Drivers report published. 3 See 's previous iteration of its Premium Drivers report published in March 2015.

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The Savings Variable - Holding Firm

's Premium Drivers research has found that the savings variable hovered resolutely around the 16% mark for much of the past quarter and ended the period to 31 May at 16.1%. This is just another indication that motorists are facing up to the prospect of higher insurance premiums when they seek to take out a new policy this year.

In order to give a better idea of where the savings variable currently stands, it is worth looking back over the past two years as a comparison. Interestingly, in May 2013 the savings variable was 14.3% and in May 2014 it was fractionally lower at 14.2%. In both of these years 's research showed a steady decline in the variable after the peak months of December and January. This year, however, the figure has remained relatively constant which suggests that the market is witnessing a slowdown in competition between providers.

This flattening out of the savings variable and the rise in motor premiums makes it safe to predict that prices will continue to rise this year. This will be felt most keenly by consumers when they receive their renewal notice from their insurers. They are likely to find that the cost of rolling over their existing policies will be more expensive than the cost of taking out a new policy. Motor insurers rely on a substantial proportion of their customers not changing their provider.

"This flattening out of the savings variable and the rise in motor premiums makes it safe to predict that prices will continue to rise this year."

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Key Statistics

? Over the past three months, the savings variable has remained relatively stable at around 16%, holding at 16.1% in May 2015 - meaning that the difference between the average price in the market and cheapest price in the market remains sizeable

? The savings variable in May 2015 is 1.8% higher than it was in the same month in both 2013 and 2014

Savings variable across all age groups in 2013-2015:

2013/2015 Month

December January February March April May June July August September October November December January February March April May

Savings Variable % 16.5 15.4 15.0 14.7 14.6 14.2 14.6 14.7 14.8 16.7 16.9 17.1 17.1 16.4 16.2 16.0 16.2 16.1

"...the difference between the average price in the market and cheapest price in the market remains sizeable."

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What's the cost?

Whilst the "savings variable" has remained relatively constant this year, the cost of premiums has continued to increase. The average cheapest premium was ?493.77 in May 2015 which is ?17.11 more expensive than March's average price and ?23.74 higher than January's price.

The cheapest price, averaged across all aged groups, of a motor insurance premium now stands someway ahead of figures registered at this point in previous years. For example, the average cheapest premium in May 2014 was ?451.23, which is a hefty ?42.54 cheaper than the average policy in May of this year.

However, there are great opportunities for motorists to make substantial savings when they come to the end of their policies. The average saving that could have been made by shopping around in April and May was ?94.73 and ?94.41 respectively. This is some way ahead of the where the same figure stood in the same months in 2013 and 2014.

Cheapest/Average price differential ? December 2013 to May 2015

2013/2015 Month

December January February March April May June July August September October November December January February March April May

Savings Variable % 16.5 15.4 15.0 14.7 14.6 14.2 14.6 14.7 14.8 16.7 16.9 17.1 17.1 16.4 16.2 16.0 16.2 16.1

"...there are some great opportunites for motorists to make substantial savings when they come to the end of their policies."

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