Car insurance set to rise following employee return to work
Experts are predicting that car insurance premiums will rise in the next six months as more people return to work following the relaxation of lockdown rules and the work-from-home mandate.
According to a recent report in the UK’s Guardian, it is the rise in mileage that will see costs escalate. Ryan Fulthorpe, senior channel development manager of the price comparison site GoCompare, said the risks rise as more people take to the roads again, and use their cars more frequently, and this will be reflected in a rise in premiums over the next two quarters.
“I see premiums rising over the next few months as we go out of this period of lockdown. There is the potential that consumers are going to increase their mileage because of that, and that is a very big risk factor.
“Obviously, the longer that you spend in the car the more likely that you are to get in an accident. And if you are not in the car, you are not going to cause a crash.”
Fall in car insurance prices
The predicted rise in price will be in sharp contrast to the recent drop in costs, as according to market studies, car insurance went down in price by an average of £74, in comparison to 2020’s premiums.
However, a new report by the think tank Consumer Intelligence, says that although car insurance prices are likely to ‘harden’ they could still remain relatively low - and this is due to several factors linked to consumer choices as well as fewer cars on the road.
According to the organisation’s most recent study, an increase in the number of telematics policies has been observed, with 59% of the five cheapest quotes for drivers under the age of 25, coming from telematics, UBI (usage based insurance) providers.
The study also noted that an uptick has occurred for the over 50s, with telematics products now accounting for 8% of the five lowest quotes returned for this age group.
Ban on price walking
New rules put in place by the Financial Conduct Authority are also considered a reason for potential price rises in the sector. With the FCA’s pricing remedies coming in at the end of the year, some brands are looking to gain volume while they can. Some insurers have benefited from a quiet year of motor claims in 2020, have been able to pass savings onto customers.
Other brands are also following the market downward in order to remain competitive - although whether this will continue to be sustainable after January 2021, remains to be seen.
Harriet Devonald, product manager at Consumer Intelligence, explained, “We are seeing a downward trend for premiums across the board – in all of our age and regional segments – and it’s not just the uptick in telematics quotes behind the plummeting premiums.
“With the FCA’s pricing remedies coming in at the end of the year, some brands are looking to gain volume while they can. Others, who benefited from a quiet year of motor claims in 2020, have been able to pass savings onto customers, whilst other brands are following the market downward in order to remain competitive.
She added, “It’s unlikely that this trajectory will continue as we move through the second half of the year. Once the new regulation takes force, we are likely to see a hardening market once more.”
The Consumer Intelligence car insurance report revealed:
- Average overall premiums have increased 14.5% since October 2013 when Consumer Intelligence first started collecting data.
- Prices have now fallen 18.2% from their September 2017 pricing peak. They are now at levels last seen in 2016.
- The cost of car insurance has decreased broadly in unison across all our age groups.
- Drivers aged 25-49 (-2.1%) saw their premiums drop the most in the last three months, although the over-50s (-1.5%) and under-25s (-1.1%) witnessed broadly similar falls. It was much the same story when looked at over 12 months; again, the 25-49 year-olds (-8.8%) saw premiums decrease the most – closely followed by the under25s (-8.4%) and over-50s (-7.9%).
- The cost of car insurance for the under-25s is now £1,735; for the 25-49 age bracket it’s £586, with those over 50 typically paying just £345 for an annual policy.
Graph provided by Consumer Intelligence
CB Insights: US Insurtechs Are Competing In A Global Market
In the first half of the year, insurtech companies around the world have raised US$7.4bn, nearly doubling their funding in Q2. According to Digital Insurance, insurtechs have raised US$4.8bn in Q2—an 89% increase in funding from Q1. But US firms are no longer the sole beneficiaries.
What Are the Stats?
Out of the 15 Q2 mega-rounds—those that top US$100mn—only eight included American firms. Pretty good, you might say. That’s over half! But US companies only made up 38% of the deals, which marks a 10% drop from Q1 and a 12% drop from 2020. Technically, therefore, US insurtechs are less influential than they’ve been in the past. But who says this is a bad development?
Despite my American citizenship, I’d argue that a more globally diverse insurance market is only for the best. Many of the world’s citizens who could most benefit from improved insurance services live outside of the States—and deserve local, tech-savvy services.
Why Does This Matter?
You’re always going to see the typical insurtech contenders from Western countries. For instance:
- German-based wefox: US$650mn Series C
- UK-based Bought By Many: US$350mn Series D
- US-based Collective Health: US$280mn Series F
But it’s critical that we address risk across the world. American insurtechs might be some of the most technologically skilled firms in the industry, but it’s not their first goal to address floods in Southeast Asia, crop destruction in China, and COVID complications in South Africa. That’s why we should celebrate that the recent Q2 round included insurtechs from 35 different countries.
According to CB Insights’ Q2 2021 Quarterly InsurTech Briefing, this was the first time that they’d observed insurtech activity in Botswana, Mali, Romania, Saudi Arabia, and Turkey. And ‘from a product, service, distribution, and underlying risk perspective, we—as a society and as an industry—are moving at an unprecedented speed’, says Dr. Andrew Johnston, Global Head of Willis Re InsurTech.
Just ask CB Insights. InsurTech value propositions have resonated with the world.