Motorists face biggest drop in car insurance costs in almost six years

The average cost of car insurance in the UK has fallen by £87 (14%) year-on-year – the steepest annual price drop since 2014

• Motorists in the UK can now expect to pay £538 for their car insurance, on average.

• Car insurance costs have dropped significantly throughout the COVID-19 pandemic, with prices now £37 (7%) cheaper than three months ago.

• Shopping around proven to save drivers money, as further research of UK drivers finds almost half (45%) of those who received their renewal in the past quarter (Q1 2021) saw their price increase by £45, on average⁽¹⁾.

• Louise O’Shea, CEO at Confused.com, explains the only way for drivers to know if they’re getting the best deal is to shop around, as new rules set out by the Financial Conduct Authority (FCA) will make it easier for consumers to cancel the autorenewal of insurance policies^(2).

Drivers in the UK are seeing the biggest drop in car insurance costs in almost six years, new data reveals

The average cost of car insurance in the UK dropped by £87 (14%) in 12 months, following a turbulent year which has sparked significant changes in driving habits. Throughout this past year, prices have been steadily declining, as drivers spend less time on the road. In fact, research suggests the average mileage of UK drivers dropped from 7,239 to 4,113 (43%) during the pandemic⁽³⁾. And as a result, prices have decreased by £37 (7%) in the past three months alone (Q4 2020 – Q1 2021), as insurers adapt their pricing to reflect the current level of risk on UK roads. With fewer people driving regularly, the risk of accidents is much lower, meaning insurers are paying out less in claims.

This means drivers can now expect to pay £538 for their car insurance. That’s according to the latest car insurance price index by Confused.com (Q1 2021), 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.

However, Louise O’Shea, CEO at Confused.com, explains that not all drivers will see these savings. While those shopping around and buying a new car insurance policy could have saved as much as £87, further research of UK drivers found that almost half (45%) of drivers who received their renewal in the past three months saw their price increase by £45, on average⁽¹⁾. This suggests they could be paying more by opting to renew with their current insurer

In fact, of the drivers who saw their renewal price increase this past quarter, almost half (48%) chose to stay with their current insurer, despite their price being more expensive. Of those who stayed with their current insurer, one in 10 (11%) claim the company automatically renewed the policy on their behalf. And it’s this practice which makes it difficult for motorists to opt out of their policy and find a better deal. This is something that is being investigated by the Financial Conduct Authority (FCA), which is looking into changes that will make it easier for customers to cancel their policy and benefit from the price savings being reported for new policies⁽²⁾.

The FCA’s proposal will not just make it easier to cancel auto-renewals, it is also set to prohibit insurers from calculating a price based on whether the customer is a new customer or a renewing customer. However, this does not mean that renewal prices will stay the same or decrease, as they could still increase year-on-year. The FCA has been clear that shopping around will still give customers opportunities to save.

While most drivers across the UK will see a cheaper price when shopping for a new policy, some will see some very significant savings – in particular, male motorists. The cost of insurance for men dropped by £91 (14%) year-on-year and £38 (6%) in the past quarter to £574, on average. Meanwhile, female drivers shopping around will also have saved money during this past three months, with premiums now £82 (15%) cheaper than 12 months ago, and £36 (7%) less than last quarter. This means women are now paying £477, bringing the gap between male and female drivers to £97, on average⁽⁴⁾.

Similarly, prices fell across all regions of the UK, but drivers in Manchester and Merseyside are seeing the most significant savings of all. The cost of car insurance in the region decreased by a whopping £122 (15%) in 12 months. This brings the average premium for drivers in the region to £708. Meanwhile, drivers in Inner London saved £116 (12%) on average when shopping for a new car insurance policy this past year, and are now paying £846, on average. But despite these significant savings, Inner London and Manchester and Merseyside are the two most expensive regions in the UK for car insurance. At the other end of the scale, the Scottish Borders is revealed to be the cheapest region in the UK for car insurance, with motorists paying £352 per year for their policies, on average. This is £62 (15%) less than 12 months ago.

Meanwhile, drivers of all age groups will also have seen a drop in price when shopping for car insurance this past quarter. And those in their early twenties are the biggest winners, seeing savings of up to £141 compared to last year. In particular, 21-year-olds are now paying £1,144 following a £141 (11%) drop in prices year-on-year, while 23-year-olds pay £994 – £136 (12%) less than 12 months ago, on average. However, these are still among some of the highest prices paid for insurance by all drivers. Although, 18-year-olds top the list of having the most expensive car insurance costs, forking out a whopping £1,442, despite an £80 (5%) drop in prices compared to this time last year. This is almost five times the amount paid by drivers in their late sixties, which is found to be the sweet spot when it comes to car insurance costs. The data reveals that prices are lowest for those aged 69, who pay £311 per year, on average, following a £67 (18%) drop in prices year-on-year. This is followed by 68-year-olds and 70-year-olds, who now pay £312 and £316 for their car insurance respectively, on average.

However, while the price of car insurance is decreasing, some motoring costs are in fact starting to creep up as the UK eases out of lockdown. In fact, Confused.com’s fuel price index suggests that petrol and diesel prices have been on the up since the end of last year. According to the data, drivers can now expect to pay 124p for petrol, on average. This is 11p more than December 2020. Meanwhile, diesel prices have increased from 118p to 127p in the same period. With these costs increasing, drivers will no doubt be looking to making savings where they can, starting with their car insurance.

Louise O’Shea, CEO at Confused.com, comments: “It’s been just over a year since we went into lockdown for the first time and this triggered a lot of changes in how we’re using our cars. And this is a change that could be here to stay for the foreseeable future, so it only seems right that our car insurance costs are cheaper to reflect this.

“What we are seeing is the biggest drop in prices in almost six years. But it’s important to remember that these lower prices are only benefiting those who shop around. It’s clear from our research that automatically renewing could in fact cost you more money. Loyalty clearly doesn’t pay! But if the increase is small, or you are fortunate to see your renewal price drop, 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 your renewal quote or give you the difference, plus £20⁽⁵⁾.”