MOTOR INSURANCE PREMIUMS JUMP BY £24 IN LATEST QUARTER
- Quarterly average premium jumps to nearly £755 up from £730 in the previous quarter
- Cheapest average premium available also increased to £627 from last quarter, up by £10
- Coronavirus fallout could reduce premiums as the number of claims looks set to fall
2 April 2020 – The average cost of motor insurance has increased by £24 in the past quarter according to the latest Premium Drivers report by comparethemarket.com.
The average car insurance premium in Q1 2020 (December – February) significantly increased over the last quarter and now stands at £755 – an increase of £24 compared to the previous quarter’s £730. Premiums have now increased by £47 since Q3 2019, when they reached the lowest level seen in three years, at £708.
This marks the third successive rise in average premiums, as they have been increasing steadily since Q3 2019. The last time average premiums were that low was Q3 2016, when they sunk to £697.
While premiums have historically fluctuated throughout the year, average premiums remain lower than the same time last year. In Q1 2019, average premiums were £736, with premiums increasing by £19 year on year. In addition, the cheapest average premiums available on the market have increased by £10 on the quarter to £627, and have also increased by £8 year on year.
Premiums remain a lot higher than when Premium Drivers records began in September 2012. The average premium stood at £559 in the last quarter of 2012 before rising to a peak of £758 in Q4 2017 – a £200 difference. Increased premiums were predominately driven by a number of Government changes, such as hikes to Insurance Premium Tax (IPT) and changes to the personal injury discount rate.
IPT is calculated as a percentage of the annual cost of insurance which means that those who have higher premiums pay higher tax. This disproportionately penalises young drivers, who usually pay higher premiums, and therefore are charged an average of £134 in IPT every year compared to £77 for the rest of the UK.
This most recent increase in premiums could be driven by similar policy issues such as the delay in the changes to Whiplash claims which would have reduced premiums. In a written statement in parliament on 27th February, the Government postponed the implementation date to 1st August. While insurers may have begun pricing in those changes, it seems that they have had to re-increase premiums to factor in the delay. In addition, the recent changes to the Ogden rate and broader claims inflation seem to be driving premiums further up.
The gap of £121 between the cheapest and average premiums over the last quarter shows that shopping around remains the most effective way to save money on car insurance. For younger motorists between the ages of 17 and 24, the difference is much higher, with the average young person able to save £233 by switching to a better deal.
Dan Hutson, Head of Motor Insurance at comparethemarket.com, said:
“Following a period of reducing premiums, motorists will be disappointed that premiums have continued to rise. This spiralling cost of insurance is thanks, in part, to hikes in Insurance Premium Tax. IPT remains a fundamentally unfair tax, as those that can afford it least pay the most. IPT is calculated as a percentage of the annual cost of insurance which means that those who have higher premiums pay higher tax. This unfairly penalises young drivers, who usually pay higher premiums. The rising cost of running a car, particularly for younger people, is making driving a luxury for many who see it as necessity.
“However, while the impact of the coronavirus is still unclear, the reduction in car usage could result in a reduction in premiums around the UK. The Government has reported a near 70% reduction in motor vehicle use across the country. With mileage reducing, this is likely to result in significantly fewer claims which could in turn mean that insurers can offer lower prices to consumers.”
Notes to editors:
comparethemarket.com was launched in 2006 and has grown rapidly over the past fourteen years to become one of the UK’s leading price comparison websites.
comparethemarket.com provides customers with an easy way to make the right choice for them on a wide range of products including motor, home, life, travel and pet insurance as well as utilities and money products such as credit cards and loans.
comparethemarket.com actively works with its brand partners to help provide great services to customers.
comparethemarket.com and comparethemeerkat.com are trading names of Compare The Market Limited. Compare The Market Limited is an insurance intermediary, which is authorised and regulated by the Financial Conduct Authority (Firm Reference Number 778488).