Cost of car insurance increases while fuel prices fall

There was mixed news for Irish motorists contained within the pages of the latest inflation report from the Central Statistics Office (CSO).

One of the most notable changes over the last 12 months has been a decrease of 6 per cent in the overall cost of transport.

Prices across this sector fell mainly as a result of a dramatic decline in the cost of petrol and diesel in the early part of this year as well as a less significant fall in airfares and a reduction in the price of cars.

The average cost of a car fell by 2.5 per cent over the 12 months to the end of April while petrol recorded a fall of 8.7 per cent and diesel dropped in price by 11.3 per cent.

The cost of air fares fell by 27.7 per cent as airlines benefited from cheaper aviation fuel due to falls in the price of crude oil on international markets.

The fall in fuel prices appears to have been arrested over the last four weeks however and the figures show that petrol prices actually climbed by just 2.6 per cent in April while diesel prices inched up by 0.3 per cent.

Many of the gains motorists will have experienced over the last 12 months will have been offset by dramatic increases in the cost of motor insurance over the same period.

Car insurance climbed by just under 16 per cent between the end of April 2014 and April this year.

The key reason prices have spiked in recent times can be attributed to a significant price correction in the market since the beginning of the year. Between 2011 and the end of last year, insurers were engaged in something close to a price war with many cutting premiums in order to increase their market share.

However, this hit their bottom lines and as they faced significant losses, many have had to increase their premiums for this year and next in an attempt to return to profitability.