Average cost of car insurance has fallen by £52
There’s good news for drivers, as the average cost of car insurance has fallen by £52 (6%) year-on-year, in the steepest price drop seen in two years.
Drivers in the UK can now expect to pay £763 for their car insurance when buying a new policy, on average.
This is the cheapest that prices have been since early 2019. That’s according to the latest car insurance price index by Confused.com (Q4 2020), powered by Willis Towers Watson. Based on more than six million quotes per quarter, it’s the most comprehensive new business price index in the UK.
These savings will no doubt be welcomed by drivers across the UK, as the coronavirus pandemic has forced a lot of financial uncertainty onto many households. As the country has lived in lockdown for the majority of the past 12 months, people are driving significantly less, and the data suggests prices may have dropped to reflect this.
According to further research by Confused.com, UK motorists expect to be driving almost 2,000 fewer miles this year(1), compared with last year, which can have a significant impact on the price they pay for their insurance.
Typically, having a lower mileage could mean drivers pay more for their insurance. For example, a driver with an annual mileage of between 3,000 and 4,000 miles per year would pay £155 more than if they were to drive between 8,000 and 9,000 miles(3). This is because a motorist who drives fewer miles could be considered to be less experienced and therefore a higher risk. However, in the current climate, almost two in three (60%) UK drivers(1) claim they have been using their car less since being in lockdown, meaning the risk on roads has decreased overall.
The beginning of the coronavirus lockdown signalled a significant drop in car insurance prices (£40 between Q1 and Q2 2020), and prices have remained steady since, with only a £7 difference between Q2 and Q4. But before the pandemic picked up pace in the UK last March, prices were at a two-year high, which explains why drivers are now seeing such significant savings when shopping around. And drivers who are due to renew in the next three months (Q1 2021) could also make a saving.
Those who bought a new policy in the first quarter of 2020 will have paid £809, on average. If prices stay stable over the next three months, this means they could save as much as £46, on average, by shopping around for a new policy.
However, further research by Confused.com(1) suggests that motorists who choose to renew with the same insurer may not see the same savings. In a survey of 2,000 UK drivers, more than two fifths (42%) of those who were due to renew over the past quarter (Q4 2020) said their renewal price was more expensive than the previous year, with insurers adding an extra £49 to their price, on average. Worryingly, nearly a quarter (24%) chose to stay with the same insurer, despite their price being more expensive. But two in five (40%) shopped around using a comparison site and saved £60, on average.
Louise O’Shea, CEO at Confused.com, explains that this proves that it doesn’t pay to stay loyal, despite the recent ruling by the Financial Conduct Authority (FCA) proposing a ban on renewal price hikes(2). The ruling means that insurers must offer renewing customers prices no more expensive than if they were a new customer. But this doesn’t mean that renewing customers won’t see their price increase.
The ruling, which is expected to come into force from July this year, simply prohibits insurers from calculating a price based on whether the customer is a new customer or a renewal customer. But an insurer could still review the way prices are calculated at any time, which means insurance costs for some customers could continue to increase year-on-year. Some drivers are seeing bigger savings than others. – particularly male motorists.
The average cost of car insurance for men is now £799, following a £55 (6%) decrease year-on-year. This is the first time that prices for male drivers have dropped below £800 in two and a half years. Meanwhile, prices for women are now £49 (6%) cheaper than 12 months ago. This means female drivers are now paying £718 for their car insurance, bringing the gap between men and women to £81, on average – the smallest gap in five years(4).
Meanwhile, car insurance costs fell across all regions of the UK, with some benefitting from savings of more than £70. In particular, drivers in South Wales made the biggest monetary saving last quarter, with prices now £76 (10%) cheaper year-on-year, bringing the average cost of car insurance in the region to £659.
Similarly, drivers in Central Scotland are now paying £643 following a £72 (10%) drop in prices over the past 12 months. Drivers in east and north eastern Scotland saw the biggest price drop in proportion to their average premium, saving 11% (£66) compared to this time last year, and are now paying £560, on average.
However, there are still some areas of the UK where drivers are paying significantly more than the UK average, despite saving money this past quarter. In particular, the average cost of car insurance in Inner London is now a whopping £1,220 even after a £40 (3%) decrease in 12 months. And drivers in Manchester and Merseyside are still paying an eye-watering £984, despite saving £69 (7%) year-on-year.
In fact, it is one of many regions in the UK where prices increased quarter-on-quarter, creeping up by £3 between Q3 and Q4, on average. Similarly, prices have decreased for most age groups, and most significantly for those in their early twenties. In particular, 21-year-olds are now saving £125 (8%) compared to this time last year, but are still paying a staggering £1,525, on average. But prices are even higher for 20-year-olds, who pay £1,738, which is still £109 (6%) cheaper than 12 months ago.
However, this is still significantly cheaper than the price paid by younger drivers. In fact, 18-year-olds are forking out a whopping £2,136, while 17-year-olds pay £1,984, on average. These are the only two ages groups where prices have increased year-on-year, and they are now paying £6 and £13 (1%) more than 12 months ago, respectively. Similarly, younger drivers saw significant increases quarter-on-quarter, with prices accelerating by £73 for 17-year-olds, £60 for 19-year-olds and £45 for 18-year-olds in the space of just three months, on average. That said, there are also some older age groups where prices have increased for drivers.
For example, 68-year-olds are now paying £15 (3%) more than three months ago, forking out £529, on average. Similarly, many older drivers are paying slightly more this quarter. While the cost of car insurance is cheaper now for most drivers, it’s clear not everyone is off the hook, which proves the importance of shopping around to find the best deal.
Louise O’Shea, CEO at Confused.com comments: “We’re seeing some of the biggest car insurance savings for a long while and it couldn’t come at a better time. It’s been nearly 12 months since we first went into lockdown and this put so many people in a difficult situation, so I have no doubt this news will be welcomed by so many. We’re at home and driving a lot less, it’s only right our car insurance prices should reflect that.
“That said, it’s important to remember that these savings are only being seen by those shopping around. We know from our research that insurers are still putting up renewal prices for some drivers. Even if the increase is small, please don’t settle for this as there will be an insurer out there willing to offer a better price. At Confused.com we’re so certain of this that we’re offering to beat their renewal quote or give them the difference, plus £20(5).”
