General Insurance Article - Car insurance premiums plummet following whiplash reform

Car insurance premiums have dropped by £100 between December and February following the passing of the Civil Liability Act in December, which will change the way in which whiplash claims are calculated according to's Premium Drivers Index The impact has been immediate, with insurers passing the reductions in costs straight on to consumers despite the fact that whiplash changes are not expected to be implemented until April 2020.

 While premiums have historically fluctuated throughout the year, the reduction in premiums is more pronounced this year, indicating a more structural fall in premiums.’s analysis of the premium reductions between December and February show that the average fall in the three months has been £65 over the past six years - £35 lower than the reduction this year.

 However, the more significant reduction in premiums over the last two months does not necessarily mean that we will see a significant reset of insurance costs in the coming months. Premiums increased significantly over the past few years as a result of a number of Government changes such as hikes to Insurance Premium Tax (IPT) and changes to the Ogden personal discount rate. These changes will likely keep premiums comparatively high for the foreseeable future until any mooted reforms are implemented.

 As part of the Civil Liability Bill, the Government agreed to reform the way the rate used to calculate payouts in serious personal injury claims, otherwise known as the ‘Ogden rate’, is set. It is expected that a review of the rate later this year could further reduce premiums, going some way to counteracting the punitive impact of IPT hikes.

 An additional factor which may have reduced premiums is the recent decline in the number of car registrations which could indicate that car insurers were competing more heavily on price to keep winning customers in a shrinking market.

 The gap of £116 between the cheapest and average premiums over the last quarter shows that shopping around remains the most effective way to save money on car insurance. For younger motorists between the ages of 17 and 24, the difference between the two is much higher. The average young person can save £263 by switching to a better deal, according to’s latest Young Drivers report.

 Dan Hutson, Head of Motor Insurance at, said: “This is the first bit of good news for British motorists in a long time. Insurance prices have been on a relentless upwards march since 2012. A £100 drop in insurance costs between December and February indicates that a more structural reduction in premiums is taking place.

 “These reductions in cost follow recent changes to the law around whiplash claims, passed in December 2018 and due to come into force next year. This is also likely aided by the reduction in the number of car registrations in the past six months, which suggests that insurers are having to compete more to win a larger share of a smaller market. With the review of the Ogden personal injury discount rate now under way, there is hope for motorists keen to see further reductions of their premiums.”         

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