As drivers budget for the year ahead, they face the prospect of an unwelcome increase in the price of motoring – a rise of 10% in insurance premiums. New figures show that the average annual premium exceeds £700, a sharp increase on the same time last year, as the end of travel restrictions increases the risk of people getting into accidents.
Counting the costs
Figures from comparethemarket.com for Cash show that the average premium comes in at £703 a year for new customers – up £67 on last January. The rises include both comprehensive cover, which has gone up by £63 to £679 a year, and third-party, which has increased by £56 to £1,621. The figures are calculated by taking the average of the lowest five prices on the market.
Drivers with diesel cars have seen their premiums go up to an average of £716 from £658 last January. Petrol vehicles, meanwhile, are up to £695 from £621 in 2021. Electric car drivers, however, saw their bills go down from £678 to £629 on average.
Price pressures
One factor behind the increase is the end of lockdown restrictions. As drivers did not need, or were unable, to get behind the wheel for significant parts of last year, premiums were lower. But with the relaxation of restrictions comes freedom to get back on the roads, and the possibility of more collisions, says Ryan Fulthorpe of price comparison site GoCompare.
“Last January we were in lockdown, which meant there were fewer people on the roads and in accidents, therefore claims costs and insurance costs were lower. Now we are in a new normal, those prices have been rising,” he says.
Insurers have also seen the cost of repairs to vehicles go up. The British Insurance Brokers’ Association (BIBA) says that more sophisticated cars can result in higher bills. “The costs of car repairs are increasing because of the increased use of technology,” it says.
Admiral, the biggest car insurance company in the UK, says traffic has returned to pre-pandemic levels and accidents have also increased. “On top of this, the insurance industry is experiencing inflationary pressures from increased repair costs, parts shortages and labour costs which all impact on the cost of claims,” it says.
This month has seen the most significant shake-up to the industry for decades, as insurers are now banned from quoting policyholders a higher price to renew than they would offer a new customer. The move follows complaints that customers who regularly switched were paying much lower premiums than those who renewed.
The Association of British Insurers (ABI) says it is too early to tell what impact the new reforms have had. It says that data from the ABI for the first nine months of last year showed premiums were at the lowest level in five years, although those figures are calculated in a different way to statistics from price-comparison websites. It suggests that increasing costs for insurers could continue.
“There remains cost pressures, particularly around rising repair costs that may have a greater impact going forward,” a spokesman said.
The one relief for drivers is for those who have gone green and drive electric vehicles (EVs), premiums have dropped by 7%, according to the comparethemarket data.
Fulthorpe says insurers are now better informed about how much it costs to repair EVs. “They are able to understand a lot more about them,” he says. “At the start of last year, they did not have enough data to build their pricing models to accurately quote for the actual risk. Now there is plenty more data on the cost to repair and the correct repairers to approve.”
Shopping around
So should you still shop around, even though the new price rules have come into effect? Yes, it is always worth looking to see if there is a better deal elsewhere with another insurer, even if it can be a laborious process.
MoneySavingExpert recommends getting quotes on all of the four big comparison sites – MoneySuperMarket, comparethemarket, Confused.com and GoCompare – to get a full view.
It is then worth checking with Direct Line, which only offers products directly. After that, look at cashback sites to see if you can get any money back by buying through them – for instance, Quidco offers up to £35 if you use it to purchase a policy.
Ways to save on a new policy
Be wary of over-insuring your vehicle. Look out, too, for automatically included features such as breakdown cover which may be included with your bank account, or key cover which you may already have on home insurance.
Watch the excess. The amount you pay when you make a claim is typically between £100 and £500. Increasing it will cut your premium. But take into account that setting it too high will prove costly if you do make a claim.
The cheapest time to get a quote is just over three weeks before the policy begins, according to research by MoneySavingExpert. It puts the optimal time to get a price at 23 days before, after which prices tend to rise.
Installing “black box” technology in your vehicle, which tracks how you drive, can tell the insurer how safe you are and may reduce your premium.
Source: Which?, MoneySavingExpert
