Owning a car doesn’t come cheap, but there’s one cost that just keeps on rising and rising – and that’s car insurance. Over the last four years the average premium has increased by 34.6% and in the last year alone it’s risen by 15.7%, bringing the average policy to £666.**
Price hikes have been put down to the changes in the Ogden rate which is the formula used to work out the amount of compensation given; the new rules came into effect in March 2017. It means that insurance providers now have to pay more money upfront to successful claimants. Whilst it’s good news to those receiving compensation, it’s not great for the rest of us, as our premiums are likely to rise to reflect the increase in costs to insurance providers.
Those hardest hit, are young drivers between the ages of 21 and 24 who pay an average premium of £1,202. But it’s not all bad news for youngsters, the rate at which premiums are increasing for them, is the lowest of all, at 13.1% per year. The slow rate of increase is predominantly thanks to telematics or black box policies which base premiums on an individual’s driving habits. In contrast, the over 50s saw the biggest increase in cost at 17.9%; however, a typical premium for this group, only comes to an average of £418.**
Various factors influence the price of car insurance, such as the driver’s age, motoring history and job; but where you live can also have a profound impact on the cost of your cover. So, spare a thought for drivers living in London, who pay the biggest average premiums in the country at £1,000 – and that’s based on the five cheapest policies on offer. London averages are also rising the fastest of anywhere else in England at a rate of 16.7%.**
However, lucky drivers in the south-west of England enjoy the lowest premiums at an average of £474. But with their insurance costs rising at a rate of 15.9% every year, it might not be long before they contemplate moving to the west midlands – which has the lowest annual increase in premiums in the country at just 13%.**
But tales of woe for car owners don’t stop at changes in the Ogden rate; insurance premium tax (IPT) costs have also increased from 10% to 12%. The increase in IPT came into effect in June 2017 so the full impact of the increase probably won’t be felt until policies get renewed throughout the year.