Leading law firm Thompsons Solicitors is challenging car insurers to explain why they have again increased premiums for customers when their profits have continued to rise over the last year.
Annual premiums for drivers have risen by an average of £715 – 19% higher than the £600 average this time last year. The increase is the sharpest in five years, and premiums could soon surpass the record levels of 2011.
Insurance broker Willis Towers Watson has suggested the rise is due to ‘the cost and complexity of repairs’ on motors. Other reasons cited include a tax increase from 9.5% to 10%, coming into effect in October 2016, as well as ‘fraudulent’ claims.
However, car insurance giants such as Direct Line and Admiral failed to make any comment on the issue of fraud in their annual reports to shareholders and have been quiet on the quoted rise in premiums. Thompsons is urging insurers to be transparent about how they are calculating their prices.
Tom Jones, Head of Policy at Thompsons Solicitors said: “Car insurance companies absolutely do not need increased revenue – they have seen huge profit and dividend increases in the last year. In 2015, Direct Line increased its UK motor insurance operating profit by 14%, and Admiral increased its UK motor insurance profit before tax by 11%. Car insurance share prices have been among the most stable during the uncertainty of Brexit – indicating that the market is still banking on these companies making huge profits.
“Interesting, isn’t it, that rather than absorbing a negligible 0.5% increase in tax, car insurers are opting to pass the cost straight onto their customers? Hardly the actions of trust-worthy consumer focused businesses operating in a highly competitive market - as the government has sought to portray them.
“Is it being too cynical to view this as insurers jacking up prices now - when the lack of transparency means nobody really knows what they base their premium prices on - so that if the government increases the small claims limit they can miraculously reduce them back down? They will remain very profitable but put the saving down to the small claims limit change.”