The vast majority of us spend a significant amount each month on insurance of one kind or another. But now technological advances could lead to falling premiums – with car insurance costs leading the way…

By Mark Richards

Let me ask a simple question. How much a month do you spend on insurance? I am not suggesting you cancel any of it, just asking a question…

Home insurance, car insurance, life insurance (or assurance, depending on the policy), quite possibly pet insurance and, of course, if you are going on holiday this year, you will most certainly need holiday insurance. Oh, and cancellation insurance. Supposing you cannot go for some reason?

We wrote on Friday about the struggle most people have had over the last 12 months as wages have consistently lagged behind inflation, making the majority of us worse off in real terms. Despite this, we have had to keep paying our insurance – and the cost of it has only seemed to go in one direction.

But there is some light at the end of the tunnel for hard-pressed consumers. Car insurance costs are set to fall thanks to a clampdown on whiplash claims, and some exciting developments at Swedish car maker Volvo promise cars that will be much safer in the future – paving the way for car insurance costs to fall dramatically.

Car insurance costs down for the first time in three years

Last week the BBC reported that car insurance costs had come down for the first time in three years. Why? The government has announced plans to curb the high number of whiplash claims, which currently cost UK motorists over £1bn a year.

Claims for road traffic accident-related injuries are 50% higher than they were ten years ago, despite a fall in the number of reported accidents and despite the UK having some of the safest roads in Europe.

But we have all answered the phone to a cold-call that begins “have you been injured in an accident that was not your fault?” Sadly all too many of these calls have resulted in fraudulent claims for whiplash, leading the Government to act.

Justice Secretary David Gauke said,

“We are putting measures in place to ensure that whiplash claims are no longer an easy payday. The bill [that is going through parliament] will seek to set fixed amounts of compensation for whiplash claims and halt the practice of settling claims without medical evidence.”

Add in proposed changes to the way long-term compensation is calculated following serious injuries – something we wrote about last year – and it looks as though car insurance premiums are set to fall. The savings will not be dramatic in the short term – some estimates put the average saving at £35 a year on the average motor insurance premium of £481 a year – but it is at least a move in the right direction.

But could accidental damage claims disappear completely?

That sounds a fanciful suggestion, but a development pioneered by Volvo – dubbed ‘the most significant development since the safety belt’ – could be the beginning of the end for car crashes.

Since the Volvo XC90 went on sale in the UK in 2002 more than 50,000 vehicles have been sold – yet not a single person has been killed while driving it, or as a passenger in the vehicle.

‘Ah well,’ you might say, ‘Teenage tearaways do not drive Volvos…’

If 500 vehicles had been sold you might have had a point. But 50,000? That is a more than acceptable statistical number – and the only car with a comparable record is the Audi Q7, although that was only on sale in 2015 and 2016.

The Volvo XC90 is, according to independent laboratory Thatcham Research, the safest car it has ever tested.

One reason for this is Volvo’s pioneering work on camera and radar systems to warn drivers about road hazards: these systems now bring the vehicle to a stop if it gets too close to another vehicle. Quite clearly Autonomous Emergency Braking (AEB) as it is known will save lives – equally clearly, it will lead to lower insurance premiums.

Developments like these will be especially welcome to younger drivers, many of whom have traditionally paid insurance premiums that were higher than the value of their vehicle. But now developments like ‘black boxes’ are encouraging younger drivers to drive more safely and contributing to lower insurance premiums.

The technology will continue to develop – although right now there is still plenty of work to do. Most people will be aware of the recent tragic case in Arizona where a woman was killed by a self-driving car. But as the old saying goes, ‘nothing can withstand an idea whose time has come.’ And self-driving cars and constant improvements to in-car safety are emphatically an idea whose time has. The good news is that the improvements are likely to come hand-in-hand with lower car insurance premiums.

Could other types of insurance follow car insurance?

Quite clearly advances are being made in all technology – and the good news is that it could well cut the cost of the other insurance we pay out each month. Action on fraudulent claims will reduce the cost of our holiday insurance and tech development should make our homes safer and more secure, reducing the cost of home insurance.

Then there is your life cover. The increased use of genomics (the study of someone’s genes) should lead to the development of personalised medicine and treatment. One of the countries leading the way in this is South Africa, which has launched the African Genomics Centre. The hope is that even clients who are paying high premiums for life cover (so-called ‘loaded’ premiums reflecting extra risk) will be able to take specific preventative action by learning more about their genes – and ultimately reduce the high cost of their cover.

So car insurance costs are coming down: less to pay for holiday and home insurance and even the cost of your life cover will come down. Everything in the garden is rosy: or it would be if the vet’s bills did not keep going up…