Wednesday, 30 January 2013 01:25

By Ben Salisbury Follow @news_myfinances

The latest AA insurance index shows that average car insurance premiums are continuing to fall.

However, the AA said that the average premiums mask massive differences caused by the European court of Justice ruling that ended the use of gender to calculate premiums, from 21 December.

The AA’s Shoparound summary which takes an average of the cheapest five quotes from a range of insurers based on a basket of risks fell by 2.9 per cent over the three months to the end of December 2012, taking the average to £789, the lowest level since October 2011.

The AA said that premiums for men are falling at a faster rate than for women and that premiums are lowest in Scotland at an average of £580.

Overall, the AA said that car insurance premiums have risen by 4.7 per cent for women aged 17-22, while there has been a drop of 1.9 per cent for men of the same age.

Simon Douglas, director of AA Insurance, says: “Never has an average been so meaningless.

“Certainly, average premiums are falling but they mask considerable extremes for individual groups.

“Many commentators – and indeed some from the industry – have made unhelpful generalisations.  Headlines saying premiums have increased by 50% for young women don’t paint a true picture of what is actually happening.”

“Of course, there are young women who will see premium increases of 30% or more while others will find their premiums fall,” Mr Douglas points out.

Mr Douglas says that it is impossible to generalise about premiums because he believes insurers “have gone back to square one in calculating risk.”

He said: “Legitimate proxies for gender, such as occupation or the type of car driven will significantly influence premiums but each insurer will calculate their quotes based on their own interpretation.  As a result, some men are seeing unexpected premium increases and some women decreases.” 

Older female drivers have seen average premiums drop, but at a slower rate than men.

Mr Douglas says he expects the general downward trend to continue but there are a number of factors that influence individual premiums.

He said: “There are winners and losers following the Gender Directive.

“Some of the more extreme predictions that young women will be ‘priced off the roads’ have simply not come to pass,” he says.  “Many drivers won’t see the effect of the changes for weeks or months, when their premium becomes due for renewal and a lot can change over that time.

“Insurers will be watching how the balance of their business moves following re-pricing of premiums so I expect further adjustments over coming weeks.

Northern Ireland has seen the biggest falls with premiums dropping by an average of 5.4 per cent, followed by the Midlands where prices have dropped by 4.0 per cent.

London has seen the smallest drop at just 0.7 per cent, followed by Wales and the West Country at 1.5 per cent.

Meanwhile, there has been small rises in the cost of both content and building premiums for home insurance policies.

The Shoparound summary shows that buildings insurance has risen by an average of 0.2 per cent to £176 and contents insurance is up by 0.5 per cent to £90.

However, Mr Douglas said that flooding seen in 2012 has yet to be applied to premiums which means the underlying trend of price increases could actually be higher.

He said: “The year ended with widespread floods and there are diverse views in the market on how much effect they will have on premiums.

“Home insurance has certainly performed better than the car insurance sector.  And, while the number and severity of weather-related claims has been increasing, events during 2012 have not been on the scale of the 2007 floods.”