Motor insurance premiums in the UK will continue to soar and won’t be significantly affected by government reforms until next year, rating agency Fitch said in a new forecast.
Fitch said proposals announced by the government in 2015 to reduce false whiplash claims are unlikely to have an immediate impact on car insurance premiums.
“Even if and when the proposals are implemented, we believe insurers will be reluctant to pass savings on to consumers before seeing evidence of reduced claims costs, so we do not expect the reforms to significantly affect prices before 2018,” the agency said.
Fitch said motor insurance premiums will keep rising because the levels of reserve releases that have supported profitability in recent years are unsustainable in the long term.
The rating agency noted that prices have been shooting up since early 2015 and reached a 10% year-on-year increase in the second quarter of 2016.
“However, premium rates are still below 2012 levels and we believe more rises are inevitable,” Fitch said.
For home insurance, Fitch believes that the growing use of price comparison websites will increase competition and keep pricing under pressure.
According to the agency, more than 50% of household insurance sales are now transacted through aggregators, up from 20% in 2009.
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