Weekly whiplash news review: 7 days ended 24 oct 2012:
It may seem backwards, but insurance companies have been actually dropping their premium prices slightly even as claims figures – and their costs – keep rising.
A report released by the AA this week was quick to point out that motorists have finally gotten some relief, as insurers have reduced their average prices by as much as 2.9 per cent in some cases. However, even as these insurance companies scale back their retail prices, the costs they incur from paying out on whiplash claims and other personal injury compensation cases are not dropping – in fact, they’re going strong.
So what’s causing the sudden drop in prices for the average motorist, especially considering that most insurers are strapped for cash because of the difficulties they face in defending whiplash claims? Well, it’s simply another example of an industry shooting itself in the foot, as the story seems to indicate that competition hotting up between insurers has led to a price war, resulting in a reversal of what has otherwise been an inexorable, steady rise in premium prices over the past few years.
Indeed, the AA’s Simon Douglas even commented as much after revealing the motoring organisation’s findings that prices are dropping off for the first time in years. Costs are indeed still mounting, Mr Douglas remarked, adding that prices only receded over the past quarter due to a highly competitive market.
This price drop will most likely prove to be quite short-lived, of course, as it’s simply not sustainable in the long run. It may not even be sustainable right now, and could result in insurers losing even more cash as they struggle to remain competitive alongside their rival, despite the fact that they are all collectively paying billions of pounds in damages to those injured in road traffic accidents.
Not only that, but prices are likely to jump by as much as 25 per cent for women right before the end of the year, thanks to the 21 December deadline for the European Court of Justice’s landmark decision banning the use of gender in determining insurance rates. Women have traditionally been viewed as safer drivers by insurers, netting them a good discount over their male counterparts, but no more come December.