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.