Despite recent media concerns over the price of insurance premiums, there is reason to believe that the current situation that policy holders find themselves in is not as threatening as many think. For most of this year motor insurance premiums have not increased much, if at all, and it is due to huge claim costs that people fear a sharp rise in premiums.

In fact, according to the recently published Faculty of Actuaries’ full 2011 report of UK motor insurance, accident frequencies have been decreasing since 2007. Not only that, but surprisingly road usage is down since 2010. Mid-2007 was a peak period for road use but also road traffic accidents and since then both the total number of miles driven and the number of reported accidents has been in decline.

When it comes to the cost, however, and since 2010, the incurred average cost of claims has never been higher. This tells us that although accidents are becoming less frequent, the total cost of the damage caused is increasing. Inflation rates sometimes obscure the true meaning of statistics but in this case inflation in 2007 was significantly higher than in 2010 (10.9% to 7.2% respectively), yet the years following 2010 have seen higher claim costs than 2007 even though the number of accidents were greater in that year. This shows that despite lower inflation and fewer accidents nowadays, the average claim cost is much higher.

There may be fewer accidents now but according to the research a greater proportion of them have bodily injury elements. These factors are perhaps the reason why many agree that insurance premiums are soaring – the research suggests otherwise. In fact, according to the AA Insurance Premium Index for the first quarter of 2012, the average Shoparound premium quote for a typical comprehensive car insurance policy dropped by 1.1%. Moreover, over the year ending March 31st 2012, the Shoparound index only rose by 7.7% which is the smallest annual increase since 2008.

Although the figures seem to suggest either no premium movement or a slight decrease in average cost, the factors that influence premium increases are still present. Insurance fraud and an increasing number of personal injury claims have produced the industry’s current climate and it is arguably down to authorities and governing bodies to successfully deal with these factors.