Motor Insurance: When average is not good enough ...
The latest British Insurance Premium Index from the AA indicates that the 2012 downward trend in quoted premiums for comprehensive car insurance continued during Q4 by an average of 3%.
While this 'average' percentage reduction may be true, statistically, it seems more of a 'headline grabber' than a true reflection of what's really going on in the UK motor insurance market. This observation can also be made on the widely predicted double-digit increases in female motor insurance costs following the implementation of the EU gender equality Directive in December 2012.
UK motor insurance premiums are now more dynamic in nature - driven by the greater transparency in pricing offered by online brokers and insurance aggregators - than ever before and the current re-pricing of premiums will no doubt continue well into 2013. As such, is the continued reporting of average percentage movements for the market as a whole now a redundant exercise and, in some ways, misleading as to what is really happening within individual risk categories e.g. female motorists?
The pre-December 21 fears that rates for female motorists would increase by up to 50% has, according to the AA, given way to average premium increases of 4-5% while their male counterparts have only seen premiums reduce by up to 2%. Again this 'average comparison' misses the point that females in the 17-19 age category have experienced increases in excess of 30%. Of course, it's early days in the race to capture (or retain) market share of the female motorist but the indications are that the armageddon scenario, as predicted by the media in Q4 2012, may not have come to pass - especially for the over 30s.
There is no doubt that the old pricing models for motor insurance are now being stress-tested and in some cases radically overhauled by many of the leading insurers as they struggle to not only maintain overall market share but also to re-balance their risk portfolios between female and male drivers in the months to come.
One thing is clear, the outcome of these repricing exercises will impact on all motorists with the winners and losers only becoming evident at the end of 2013.