Car insurance premiums dropped by an average rate of 14.1% over the last year as a more competitive market was seen.  The drop in prices comes with expectations that false whiplash claims will be faded out.

According to the AA Insurance Premiums Index, which takes the average of the five cheapest quotes on the market, the typical quote for annual comprehensive cover slid by 4.6% on the previous quarter to £533. Simon Douglas, Director of AA Insurance has warned ‘premiums may have been falling too fast ahead of much-anticipated changes within the industry. Helter-skelter prices could end up bouncing back up sharply later this year.’

The AA Insurance Premiums Index, which has now been running for 20 years, has found that the North West is still the most costly region to insure a vehicle, with the average premium for a price shopper standing at £809, although this region saw the largest price drop over the past quarter at 6.3%. Scotland is still the cheapest place in Britain to insure a car, with the premiums for someone who price shops falling to £389 after a 4.9% fall compared to the previous quarter. In wales the average premium is £492, whilst in London it is £629.

Motorists aged between 17 and 22 years old saw the biggest drop in the premiums that they were offered last quarter with a 5.4% fall taking the average premium for someone in this age group who shops around to £1,187.

Those aged between 60 and 69 years old are offered the cheapest average premium at just £302. This is a 4.1% drop in prices over the last quarter.

Insurers claim that false whiplash claims typically add £90 to a driver’s policy and so the tougher active unveiled last autumn to combat whiplash injury fraud, including independent medical panels to make it harder for people to exaggerate or make up injury claims.

Cutting out errors from the car insurance application process will help to reduce costs by an average of £15. The initiative being put in place, means that motorists renewing their insurance will be asked to provide their driving license number, which will give insurers a more accurate picture of a driver’s experiences and convictions.

The fall in premiums have been said to have come about due to a combination of the competitive market rising and the anticipation that the law changes will weed out fraudulent whiplash claims.

The fall in premiums should level off by the end of this quarter, but the biggest fear is that if the falls are too great, the premiums will bounce up again sharply later on in the year, which would not be good for the reputation of the industry.

- Danielle Wheeler