OLDER DRIVERS WHO FAIL TO SWITCH INSURANCE PROVIDER EACH YEAR ADD £55 TO THEIR BILL – FINDS COMPARETHEMARKET.COM

  • The average premium for drivers over 50 years old has risen to £398, up £40 (11%) year on year
  • Average motor insurance premium paid by drivers over 50 has risen £63 (or 19%) since our records began over four years ago
  • Changes to Ogden Discount Rate will add an estimated £33 to motor premiums for older drivers

27 March 2017 – The cost of motor insurance is taking its toll on older drivers, with premiums this quarter reaching an average of £398. Specifically, drivers aged over 50 years old have seen their premium increase by £40 over the past twelve months.

The latest Premium Drivers index from comparethemarket.com reveals that the average motor insurance premium paid by drivers in this age group has risen £63 (or 19%) since records began over four years ago, when the average premium for this age group cost £334.

Premium Drivers, which analyses the difference between the “average”* and the “cheapest”** motor insurance premiums has found that the quarterly cost difference between the cheapest and average premiums in the market has grown to £55 for drivers over 50. Even the cheapest premiums have risen over the years; between December 2012 and February 2013, the least expensive premium for drivers over 50 stood at £279. By contrast, the cheapest premiums for this age group now cost £343.

A rise in whiplash claims and increases to Insurance Premium Tax (IPT) have partly contributed to the rise in premiums as insurers look for ways to absorb increased costs. IPT has now been increased three times by the Treasury since 2014, doubling the tax from 6% to its new rate of 12% from June 2017.

Changes to the Ogden Discount Rate, as announced in March 2017, will also put further upward pressure on premiums. Under the proposed changes, we estimate motorists aged 50 and over could see an additional £33 added to their annual premium, meaning that the average policy for this age group could reach around £423.

However, there is some hope for motorists. The Financial Conduct Authority has ruled that, as of the 1 April, all motor insurance providers must show the price of last year’s premium on their renewal notices. Consumers will therefore be able to see by how much their new premium has increased. This comparison should encourage more people to compare providers and search out a better, more cost-effective deal.

Those thinking of buying a new car this year should be wary of further changes affecting running costs. From the 1 April 2017, the way in which vehicle tax is calculated will change. After this date, levels of car tax will no longer be closely linked to Co2 emissions. Instead, a surcharge of £310 per year will be applied to vehicles with a list price of more than £40,000.

After the first 12 months, drivers will have to pay a tax rate based on the amount of fuel their vehicle uses, as well as the additional rate of £310 a year for the next five years. After five years, the tax falls back to the standard annual rate depending on the fuel your vehicle uses. Those drivers thinking of purchasing a new car worth over £40,000 will need to factor in the additional surcharge of £1,550 over the next five years.

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Simon McCulloch

Director

comparethemarket.com

“Another hike to Insurance Premium Tax comes into effect in June this year and, combined with the impact of the changes to the Ogden Discount Rate, drivers can therefore expect prices to continue to rise well into 2017.


“Drivers of all ages can save money by switching motor insurance provider but it seems the older we get the more likely we are to stick with one insurer. This lack of competition can lead to a market where providers use factors like IPT hikes and changes to the Ogden Discount Rate as an excuse to increase prices and rely on consumer inertia to maintain market share.


“One of the most effective ways of injecting more competition into the market, is by encouraging consumers to search out the best deal for them.”

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