06 March 2007

Confused.com predicts a 10% rise in car insurance for 2007 | Cheap Car Insurance and Home Insurance from Confused.com

Leading car insurance search engine Confused.com is predicting that premiums could increase by a minimum 10% over the coming year.

Debra Williams, managing director of Confused.com said: 'Car insurance payouts have risen steadily over the last few years while premiums have remained relatively static, resulting in average claims payouts of £109 for every £100 generated in premiums. Such losses can only be sustained for so long, and we predict premiums will be forced to rise by a minimum 10% to meet the shortfall.

'While it's evident that there is a deficit in premium vs. claims payouts, not all insurers will necessarily increase prices. We expect those with comparatively low claims ratios will find it easier to respond to market movements and maintain competitive deals, while some insurers will keep rates low in order to build volume.

'While price remains one of the key deciding factors for drivers, insurers are recognising that the savvy insurance shopper is wising up to the fact that loyalty doesn't pay, and are responding by adapting pricing strategies and becoming more price-creative.

'We predict that while insurers will continue to target price-sensitive customers with an increasing number of no-frills products, such as Norwich Union's Simple Cover and Admiral's FlexiBell, many will target the more sophisticated shopper with 'product plus' policies, which balance premiums with perks to retain and attract new customers. These value-add incentives already include the likes of £50 cash back (Post Office), handbag cover (Diamond) or a free MOT (Kwik Fit).

'While the trend of providing preferential policies, combined with value-add incentives is flourishing in response to the industry's need to be more competitive, this approach doesn't always guarantee the cheapest premiums; prices are based on insurers' individual claims experience, therefore it's essential that consumers look beyond the promotional tactics and question whether incentives are worth any savings they may make.'

'Regardless of how the market plays out over the next six months our advice to consumers remains, do your homework, look beyond the marketing hype and don't opt for the first policy that catches your eye,' says Debra Williams. 'There are still savings to be made. Those consumers who shop around at renewal time will be the ones that profit from the best deals on the market.'

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