The price of car insurance has dropped by £39 in the past 3 months – the steepest quarterly drop in prices in more than two years 

 

  • The average price of car insurance now stands at £770 following a £19 (2%) decrease year-on-year, making it the lowest prices have been in more than a year (Q1 2019).
  • This is the first time that car insurance prices have dropped in over a year, as the coronavirus pandemic forces drivers to stay home.
  • Louise O’Shea, CEO at Confused.com, urges motorists to shop around to seek out savings, as further research shows savings aren’t being passed on to loyal customers.
  • Nearly half (46%) of UK drivers who renewed their car insurance in the past three months saw their price increase by £47, on average(1).

 

The past three months have seen the cost of car insurance U-turn. New data reveals that prices dropped by almost £40 over the quarter on average, as the coronavirus pandemic forced drivers to stay home.

Drivers in the UK can now expect to pay £770 for their car insurance, as prices dropped by £39 (5%) in the past three months, and £19 (2%) year-on-year, on average. That’s according to the latest car insurance price index by Confused.com (Q2 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.

According to the data, this puts an end to more than a year’s worth of annual price increases. Only three months ago the average cost of car insurance was just £49 away from the most expensive cost on record. This is also the steepest quarterly drop in prices in more than two years (Q1 2018), which means prices are now at the lowest they have been in over a year (Q1 2019).

The news of cheaper car insurance costs may come as a relief to many motorists as the coronavirus pandemic forces people into financially difficult situations. But Louise O’Shea, CEO at Confused.com, urges drivers to shop around, as research shows those renewing with their current insurer are not seeing the same savings, despite being encouraged to stay home. In fact, a nationally representative survey of UK drivers(1) reveals nearly half (46%) of those who received their renewal notice between April and June this year saw their price increase by £47, on average, suggesting their loyalty wasn’t being rewarded during these challenging times. However, while automatically renewing might seem like the stress-free option under the circumstances, nearly two in five (39%) didn’t settle for the price increase and shopped around using a price comparison site to switch insurers, resulting in a £61 price saving, on average.

This proves that it’s crucial for drivers to take the time to check their renewal document and compare with the previous year’s price. And even if prices are similar, or have dropped slightly, then there is still the opportunity to save money. To further incentivise drivers to seek out a better deal, Confused.com is giving them the chance to save even more by guaranteeing to beat their car insurance renewal price, or give them the difference plus £20(3).

The past three months have seen a huge change in circumstances for many people, with millions spending more time at home. Half (50%) of UK motorists have cut their annual mileage as they have been using their car less during lockdown, meaning there’s less traffic on UK roads. This reduces the risk of accidents, and therefore minimises claim pay-outs for insurers. Similarly, between March and June, 1.3 million people applied for a SORN(4) while new car sales plummeted(5). Both of these factors may have led to a loss of business for many insurers, putting them under pressure to adapt their pricing to the situation.

However, as the UK government gradually eases restrictions, it’s expected people will be driving more often – although they might be feeling slightly out of practice – and car sales will start to increase. It’s likely that car insurance costs will return to the upwards trend we saw before the coronavirus pandemic, but at what pace remains to be seen. If drivers do notice their car insurance costs starting to creep up, then there are ways to bring their price down. However, it can be easy for drivers to feel overwhelmed about how to make the best financial decisions under the circumstances. According to Confused.com’s expert guide, there are several things drivers could do to reduce the price they pay for car insurance.

For example, drivers can cut back on their cost by paying annually where they can. While paying monthly is more convenient, it’s like taking out a small loan, which will usually carry interest on top of the initial price. And according to Confused.com data this can cost as much as 16% more than the annual price(6).

Despite recent price drops, some drivers are facing more expensive car insurance costs than others – particularly male motorists. The average cost of car insurance for men is now £810, following a £37 (4%) fall in prices over the past three months, and £17 (2%) year-on-year. However, female drivers benefitted from greater price reductions, with costs for women dropping by £43 (6%) over the quarter and £22 (3%) over the year. This means female drivers are now paying £719, bringing the gap between men and women to £91, on average. This is the biggest price gap between the two in over a year(2).

Similarly, drivers in some regions are facing significantly more expensive car insurance costs than others. In particular, Inner London is now the only region in the UK where motorists pay more than £1,000 for their car insurance, on average, despite a £70 (6%) drop in prices in the past three months. Drivers in the region pay an eye-watering £1,202 to insure their car, on average.

Meanwhile, a drop in prices means motorists in Manchester and Merseyside and Outer London are no longer paying more than £1,000 for their car insurance but are still paying a whopping £984 and £971 respectively, on average. This is the first time that drivers in Manchester and Merseyside are paying less than £1,000 since early last year, following a £48 (5%) drop in prices in three months and £27 (3%) year-on-year.

In most cases, prices across the UK regions have decreased, with East Midlands and the Scottish Borders being the only exceptions. In these regions, motorists are now paying £4 (1%) and £2 (0%) more than last year, respectively. Despite prices dropping by £41 in the past three months in both regions. The average cost of car insurance in the East Midlands is now £753, while motorists in the Scottish Borders can now expect to pay £584 on average.

There are also some areas of the UK where prices are more expensive now than they were last year, despite most seeing prices drop over the past three months. Motorists in Dudley in the West Midlands are now forking out £27 (3%) more than 12 months ago, with the average cost of car insurance in the area now £856, on average. This is just £37 below the most expensive car insurance price on record for this area. Similarly, prices in North West London increased by £24 (2%) year-on-year to now stand at a hefty £1,326, on average. This isn’t the most expensive postcode in the UK for car insurance, though, as motorists in East London are now paying £1,374 for their car insurance, despite prices dropping £91 (6%) over the past three months, on average.

It’s a similar picture for different age groups, as most drivers benefit from cheaper prices this quarter. In fact, some younger drivers will see the biggest difference in prices, perhaps as there are fewer ‘new’ drivers on the road due to the tests being cancelled, as typically new drivers will face the most expensive premiums. In particular, the average cost of car insurance for 21-year-olds is now £118 (7%) cheaper than three months ago and £114 (7%) less year-on-year. However, drivers of this age are still paying a staggering £1,525 for their insurance, on average. Similarly, 19- and 20-year olds saw a steep drop in prices. Car insurance for 20-year-olds now sits at £1,730, following an £88 (5%) quarterly price drop, while 19-year-olds pay £1,917, which is £66 (3%) cheaper than three months ago, on average.

Having said all that, there are also some age groups where prices have increased for drivers. For example, the average price of car insurance for 66-year-olds is now £19 (4%) more expensive than it was 12 months ago, costing £453.

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.

However, there’s more good news for drivers as other motoring costs appear cheaper now than this time last year. In fact, the average price of fuel has dropped as low as 110p in July, on average. According to Confused.com’s fuel price index(7), motorists are now paying 110p for a litre of petrol, compared to 129p in August last year. Diesel has also dropped to 116p from 132p over the same period, on average.

Louise O’Shea, CEO at Confused.com comments: “The past few months have been incredibly challenging. So it’s a relief to see a drop in car insurance costs, which is an expense we can’t avoid.

 

“The UK going into lockdown caused a sharp drop in traffic levels, which means the risk of high claim pay-outs has been lower for insurers over this period. This is likely to have contributed to this U-turn we’re seeing in car insurance costs. It’s likely that as lockdown conditions ease, prices will change further as insurers continuously readjust to the situation. We are keeping a close eye on things so that we can update our customers on any changes that may affect them.

 

“But it seems some insurers are still asking their loyal customers to pay more year-on-year, which isn’t necessarily justified if their circumstances remain the same. This is why it’s so important to shop around before committing to renewing, as there will be an insurer out there offering a cheaper price. At Confused.com we’re so certain drivers will be able to find a better price than their current insurer that we’re offering to beat their renewal quote or give them the difference, plus £20(3).