Financial shocks for UK motorists

Posted on: 5th June 2017 in Finance

It has been an eventful year for UAE motorists with new insurance laws expected to hit the average driver with shock extra cost. And in the UK too, motorists in 2017 are faced with not one but three things to moan about:

• The surge in the number of potholes on the road
• Insurance costs set to hike after “crazy” government ruling
• Petrol prices lag behind cuts in oil price

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Surge in number of potholes on the road

The first quarter of 2017 has seen a 63% in pothole-related breakdowns attended by UK breakdown experts the RAC. And a staggering 6.3 million UK motorists were affected in 2016 by the “menace” that is the UK’s roughly 2m potholes; the AA (Automobile Association) says that repairs caused by potholes cost drivers £684m at an average cost of just over £100. One in six roads in England and Wales is now so damaged that local authorities are obliged to repair it in five years. And Judith Blake of the Local Government Association paints a bleak outlook for the future, reporting that “our roads are deteriorating at a faster rate than can be repaired and it would take more than £12bn and be 2030 before we could bring them up to scratch and clear the current roads repair backlog.” £1.2bn has been tipped by the government for road repairs in the tax year 2017-18 – with the Department of Transport saying that they are “providing more than £6bn over six years to maintain roads and repair potholes.”

Insurance costs set for hike after “crazy” government ruling

In the Spring of 2017, the UK Ministry of Justice imposed a new formula for calculating compensation payments which the Association of British Insurers called “crazy”. How compensation is paid to accident victims has been changed, says the BBC, in a way “that will result in more money for the victim, but a higher cost for the insurer.” Huw Evans, Director General of the Association of British Insurers says “we estimate that up to 36 million individual and business motor insurance policies could be affected in order to over-compensate a few thousand claimants a year.” UK accountancy giants PwC have projected “an increase of £50-£75 on an average comprehensive motor insurance policy, with higher increases for younger and older drivers.” Car insurance premiums in the UK have already just hit a record high, with the average annual comprehensive policy costing £462 in the latter three months of 2016 – compared to a previous high of £443 in the spring of 2012.

Petrol prices lag behind cuts in oil price

This is not so much of a shock as Business As Usual. Despite a supermarket “price war” with the price of petrol reduced by a measly 2p or 1p this month, retail prices continue to lag behind downshifts in the price of oil. The RAC says “our April Fuel Watch figures indicate that prices should be coming down as we saw the wholesale price of petrol and diesel fall during last month by around 3p a litre.” “Motorists need to be able to trust retailers to be transparent when they are benefiting from significant savings in the wholesale price. The price of petrol in the UK did not stop rising between January 2016 when it stood at 102.3p per litre and February 2017 when it stood at 120.1p per litre; since then, the price has dropped off to 118.3p per litre in April 2017.

The moral for the motorist?

Motorists face a series of costs and obligations that is always changing. It is important to do your bit to control what you can. A key thing to master is your motoring insurance. Online price comparison sites are great but, if you have an IFA, ask him/her for tips or product opportunities – you might be surprised by what sort of deal an industry insider can get their hands on.