CAR INSURANCE PRICES AT LOWEST POINT IN MORE THAN FIVE YEARS

The cost of car insurance in the UK has fallen by £71 (12%) in 12 months to £522, according to the latest Confused.com car insurance price index

• Confused.com report reveals a drop in road accidents and reduced car usage could have contributed to significant drop in car insurance costs.
• However, research suggests only drivers that shop around are saving money, as almost two in five (38%) of UK drivers claim their insurer increased their renewal price by £44 last quarter⁽¹⁾, on average.
• Louise O’Shea, CEO at Confused.com, urges drivers not to accept their renewal price, as new rules set out by the Financial Conduct Authority (FCA) will soon make it easier for consumers to cancel the autorenewal of insurance policies^(2).
• Price drops mean most UK regions are now paying the cheapest price for car insurance in five years, with some drivers saving as much as £102 compared to last year.

Car insurance costs are at the lowest on record in more than five years, new data reveals.

On average, UK drivers can now expect to pay £522 if they shop around for their car insurance, following a staggering £71 (12%) drop in prices in the last 12 months. That’s according to the latest car insurance price index by Confused.com (Q2 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.

This is the third consecutive quarter where prices have significantly dropped year-on-year, suggesting that car insurance costs have been rapidly declining throughout the COVID-19 pandemic. Before this, prices were steadily increasing, reaching as high as £630 at the end of 2019. However, by the middle of last year, we saw a U-turn in the market, as car insurance costs started to drop, and since then prices have fallen by as much as 14% (Q1 2021) – the steepest decrease in prices in more than six years. This is with the exception of a slight 1% increase in Q3 last year.

According to a further study by Confused.com, this shift in prices could be attributed to the fact that the COVID-19 pandemic significantly reduced the risk on UK roads. According to the report, which analyses the change in driving habits throughout this past year, the number of road traffic accidents dropped by 26% last year⁽³⁾. The data shows that policeforces reported 192,001 road traffic accidents last year – most of which was spent under lockdown restrictions. This is down from 258,994 in 2019.  That’s equivalent to 710 accidents reported per day in 2019, and 525 in 2020, on average. This could be because UK roads were significantly quieter last year, meaning the chances of accidents occurring was heavily reduced. In fact, the report shows the average UK annual mileage dropped from 7,239 before the pandemic, to 4,113⁽⁴⁾.

The report also found people were not only driving less, but some were opting not to drive at all. DVLA data shows that the number of people applying for a statutory off the road notification (SORN) jumped from 250,352 to 526,747 between February and March last year⁽⁵⁾. In total, almost 3.6 million successful SORN applications were made last year, compared to 3.4 million in 2019, and equivalent to 3.7 million UK drivers sold their car during the pandemic⁽⁶⁾. With all of this considered, it suggests the risk of accidents was a lot lower than usual. And this is a key consideration for insurers when they offer a customer a price for their car insurance. As risk fell, insurers were able to reduce their prices to reflect the fact that fewer claims were likely to be made, meaning drivers were able to make significant savings when shopping around for their car insurance.

While most will be pleased to see their car insurance costs drop, Louise O’Shea, CEO at Confused.com, reminds drivers that these savings are only being seen by those shopping around. In fact, further research⁽¹⁾ by Confused.com found that almost two in five (38%) UK drivers who received their renewal notice this past quarter (April – June 2021) claim their insurance company increased the price by £44, on average. This suggests they could be paying more by opting to renew with their current insurer. Worryingly, more than half (55%) of these drivers chose to stay with their current insurer, with one in seven (15%) claiming they found it difficult to cancel their renewal.

However, this is something that has been addressed by the Financial Conduct Authority (FCA), which has said that insurers must make it easier for customers to cancel the automatic renewal of their policy⁽²⁾. Doing this will give consumers more freedom to shop around and find a better deal, without the stress and worry of the cancellation process.

The FCA’s new rules will to come into effect no later than 1 January 2022, and won’t just make it easier to cancel auto-renewals, they will also prohibit insurers from calculating a price based on whether the customer is a new customer or a renewing customer. However, this doesn’t 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.

Both male and female drivers have seen their price drop by 12% over the past 12 months, although for men this equates to a £75 saving, and £63 for women, on average. This brings the average cost of insurance for both genders to £557 and £464, respectively, and the gap between the two to £93⁽⁷⁾.

While all UK drivers benefitted from great savings this quarter, how much will depend on where they live. For example, drivers in Inner London and Manchester and Merseyside saw the greatest monetary drop in car insurance costs. Prices in Inner London are now £102 (11%) cheaper compared to 12 months ago, and £101 (13%) cheaper in Manchester and Merseyside, on average. However, these are the most expensive regions in the UK for car insurance, with drivers paying £808 and £675 respectively, on average. This is close to double the amount paid by drivers in the cheapest areas. For example, those in the Scottish Borders are paying £337, and drivers in the South West fork out just £343, on average.

Meanwhile, drivers in the North West saw the biggest shift in prices in relation to the price they pay. The average cost of insurance in the region dropped by a staggering 14% (£82) to £512, year-on-year.

It’s good news for most, as data shows drivers in the vast majority of UK regions are paying the cheapest price in five years. Northern Ireland, however, is the only UK region where prices have risen in the last quarter, up £5 (1%) over the past three months to £530.

On a more granular level, a drop in prices in West Central London means drivers in the area are now paying less than £1,000 for the first time in almost two years. The average cost of car insurance in the area is now £981, following a £94 (9%) decrease in 12 months. But it’s drivers in West London who are seeing the greatest savings when shopping around. Prices in the area are now a whopping £136 (16%) cheaper than 12 months ago, meaning drivers are now paying £721, on average.

This is still staggering in comparison to other areas of the UK. In fact, drivers in Llandrindod Wells are paying just £319, on average, while prices for some drivers in the Scottish Highlands and Islands are as low as £320.

The price paid for car insurance also depends on the driver’s age, with younger drivers typically paying the most. In particular, 18-year-olds are paying a whopping £1,409 for their car insurance, on average. Only when a driver reaches 23 does it seem to drop below the £1,000 mark, with those at this age now paying £970, on average. Meanwhile, at the other end of the scale, drivers nearing retirement are paying the least, with those aged 69 or 70 forking out just £306, on average.

But when it comes to making savings, younger drivers are seeing the biggest changes. In particular, 20-year-olds are now paying £116 (9%) less than 12 months ago, with the average premium for this age now £1,196. Similarly, drivers aged 19 and 23 are paying £111 less compared to drivers this age last year.

However, while the price of car insurance is decreasing, some motoring costs are starting to creep up as the UK eases out of lockdown. 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 131.4p for petrol, on average. This is 17p more than November 2020. Meanwhile, diesel prices have increased from 117.7p to 133.8p 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: “Car insurance prices have been consistently decreasing for some time now, and our research does show that a lot of changes that happened during lockdown arguably contributed to this.

We’re now paying £71 less for our car insurance than this time last year, on average. This puts prices at the lowest point in more than five years. But now that the government has announced the end of lockdown, where prices will go from here remains to be seen.

“What we do know is that only those who are shopping around are seeing such significant price drops, and insurers are still increasing renewal prices for their loyal customers. While new rules set out by FCA will stop insurers from pricing new and renewing customers differently, this doesn’t guarantee you the cheapest price. Changes to the way insurers calculate their pricing, or if prices start to increase across the market, could lead to renewal prices increasing.

“The only way to know if you’re getting the best deal is to shop around. Even if your renewal price is cheaper, the market is very competitive at the moment and there will be another company out there willing to give you a better price! We’re so sure of this that we’re offering to beat your renewal quote or give you the difference, plus £20⁽⁸⁾.”