The UK is facing a growing risk of an explosion of auto insurance premiums in coming years, with the National Automobile Insurance Association predicting premiums will rise by a staggering 10% to 15% by 2021.NIAA chief executive officer Mark Porter said the rise would put drivers at a significant financial disadvantage, adding: “The most likely scenario is that auto insurers will have to raise premiums for all drivers by 10 to 15 per cent over the next few years, in line with the increasing costs of car insurance, as a result of the economic downturn and a higher percentage of drivers having a new car.”
He added: “With rising costs of auto cover and a high number of car accidents, the drivers are going to be hit the hardest.
This is an inevitable part of the economy.”
The biggest threat to the industry is the increasing cost of car cover.
That is, drivers will be expected to pay higher premiums, because insurers have to pay the premium on top of the cost of the coverage.
“There are a number of factors at play here, including: drivers being more likely to own a car themselves; drivers becoming more likely and more likely than ever to drive in the UK and to drive on our roads; and the increasing number of people with health problems and disabilities who are more likely now to be in car accidents.”
“The average annual premium is likely to rise from around £2,000 now to £2.3,000 by 2021, which will hit most drivers very hard,” Porter said.
He added the rising costs would likely “drive up premiums for drivers, who are already getting poorer for having car cover”.
He said that the rise in premiums could be a “major driver” for the NAA’s membership.
“If insurers are not willing to cover drivers as much as they have been in the past, that could mean that the number of uninsured drivers is going to rise dramatically,” he said.
“Insurers have had to increase premiums for years now to make up for the reduced risk for insureds, but now there are growing concerns about the increasing financial risk for insurers.”
So insurers are now looking to increase their premiums, but they have to take account of the new threat from rising costs and the rising number of drivers being insured.
“According to the National Insurance Institute, the average insurance premium in the US has increased from around $9,000 in 2015 to over $25,000 today.
A recent report from the AAA suggested that in 2020, insurance companies could be in breach of their own insurance policies if they did not cover all of their customers’ claims, leading to an increased risk of serious injury or death.