Motor Insurance premiums set to fall again

    In general, there has been less mileage covered in 2020! As a result motor insurance claims could come down by up to 50%. Cazoo Data Services retail price index is up by 5.1% over the last 12 months

    It has been widely reported that motor insurance premiums are set to fall further in the coming weeks as the market continues to re-adjust to the current volume of travel permissible under the most recent lockdown. COVID significantly affected how the population of the UK was able to travel in the early and latter parts of 2020 and the latest lockdown has compounded matters. Although the average mileage of vehicles on retail sale has started to drop, it has yet to truly reflect the far lower mileage covered by both business and private motorists in the last 12 months but is expected to do so in the next year.

    In addition to the reduced mileage travelled, perhaps unsurprisingly the number of motor insurance claims has also dropped significantly. Some companies have reported claims levels down by almost 50%. As total annual claims settlement figures have been much lower than budgeted for, this has brought a welcome bonus to struggling insurers. However, it is also important to note that the Cazoo Data Services retail price index has climbed over the last year as demand for used cars has improved. The chart below summarises the current pricing position: 

    Cazoo Data Services base their data on retail prices in the public domain that are analysed in real-time to provide industry standard retail and wholesale pricing solutions.

    This chart highlights that since January 2020 the Retail Price Index has climbed by 5.1% which, with this normalized data and an average price of £15,587, means that the overall price of a car has increased by £794. Motor Insurers have had to consider this when revising policy costs and claims settlement, tasks which are often more difficult to complete than expected.

    Even more important has been the recognition that certain sectors of the retail market have been more active than others. Identifying what age and price bracket of the vehicle has become more prevalent has been another vital part of the insurance underwriting journey. As a direct result of COVID restrictions and the fear of travelling, there has been an increase in sales of older cheaper cars over the course of the last 12 months.

    The chart below looks at sales by age profile during the last year: –

    Data Powered by Cazoo Data Services

    It is clear from this chart that in comparison with January 2020 the volume of cars sold in the “Old Car” profile has increased. This has been evident since the end of the first lockdown period and validates the comment that more old cars are being bought as second and third cars or just commuting vehicles to avoid the danger of travelling on public transport.

    In today’s modern auto retailing market, prices shift every day and a successful business must be able to offer new customers a swift and simple insurance policy quotation and implementation journey coupled with a highly competitive policy rate to win new business. The need for flexible and accurate taxonomy and most importantly vehicle pricing to address current and future nuances has never been so critical to keep quotation engines in line with market demand and retail pricing. Cazoo Data Services is unique in providing real-time, retail driven, whole market Industry Standard data to satisfy insurance company underwriting demands.