UK car insurance price slide continues apace, says ABI

By Chris Vellacott

LONDON (Reuters) - The cost of car insurance in Britain has dropped 9 percent in the past year as more customers use the internet to shop around and falling claims feed through to prices, a new survey shows.

A quarterly index of car insurance costs launched by the Association of British Insurers (ABI) on Monday shows the average premium on comprehensive policies in the last three months of 2013 was down 36 pounds year on year at 370 pounds.

The fall adds to a two-year slide that analysts put down to growing use of price-comparison websites and legal reforms that make it harder to pursue fraudulent injury claims.

"Insurers are fulfilling the commitment they made to the government to pass savings from changes to the civil litigation system to hard-pressed motorists through lower car insurance premiums," said James Dalton, the ABI's Head of Motor Insurance.

However, insurers are cutting prices largely on the expectation of lower claims costs prompted by the civil litigation reforms and analysts are warning of a risk to earnings.

"If the ultimate effect of the government's reforms is not as successful as insurers expect, the decline in premiums would not be matched by a commensurate reduction in claims and would lead to a further deterioration in underwriting results," ratings agency Moody's said on Monday.

Britain's car insurance market is dominated by Aviva , Direct Line and Admiral , but the market is becoming increasingly competitive.

The ABI said that British consumers are more likely to shop around for motor insurance than for mobile phone contracts, with 81 percent of respondents to a survey considering policies from more than one insurer before making a purchase.

The ABI's index tracks actual prices paid for insurance contracts unlike existing indexes, which rely on quotes.

An index provided by price-comparison website Confused.com and consultancy firm Towers Watson published this month suggested that the price slide is starting to slow.

(Editing by David Goodman)