Fuel price hike threatens to offset car insurance savings

The cost of an average full tank rose to £62.85 for petrol, and £64.92 for diesel last month.

Tom Harrison
Content writer
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Posted 5 AUGUST 2020

UK drivers have been left scratching their heads after a second successive month of fuel price rises at the pumps.

While motorists have enjoyed a typical 7% reduction in car insurance premiums since the COVID-19 pandemic took hold, new RAC Fuel Watch data suggests the average price of both petrol and diesel rose by 3.21p and 2.95p a litre respectively during July.

Comparethemarket.com reminds car owners that switching their car insurance cover to a better deal remains one of the most effective ways to save money on running costs, at a time when many households are struggling to make ends meet.

Fuel price hike ‘eradicates’ insurance savings

Dan Hutson, head of motor insurance, comparethemarket.com said: “The pandemic has put huge financial strain on many drivers across the UK. While premiums have fallen significantly during lockdown – over £50 in the last quarter – the increase in fuel prices seen today could well eradicate those savings.  
“The cost of fuel has been fluctuating a lot this year and indications are that we may see a reduction in costs in the months ahead. But this will do little for those that are already struggling with the cost of running a car, whether that’s affording their car insurance payments or covering the cost of petrol.  
“Many people are now receiving less or no income as a result of the pandemic which makes it all the more important to minimise their driving costs. One of the most effective ways to save money on running a car remains to be switching your car insurance to a better deal.” 

More drivers shopping around

Comparethemarket.com’s Premium Drivers report reveals the monthly percentage difference – the ‘savings variable’ – between the cheapest and average insurance costs across all age groups.

The lower the difference between the two premiums, the more drivers are shopping around for better deals – resulting in more price competition between providers.

Our latest data shows the savings variable in Q2 fell substantially to 15.30%, down from 15.98%, and is now at its second lowest level since records began. This variable has remained significantly lower than its peak of 17.62% recorded back in Q1 of 2017.

In fact, at £679, the average premium in April was the lowest recorded for over four years.

Dan Hutson hopes these increased levels of competition among insurance providers will continue. “In the past quarter, we have seen a significant fall in the savings variable, meaning that the difference between the average and cheapest premium available has decreased,” he said.

“The savings variable can be a helpful indicator of the current levels of competition in the marketplace, with a narrower gap between the cheapest and average premiums suggesting that competition levels have increased.

“Following this, we could see a corresponding reduction in premiums as providers are incentivised to cut prices to attract and retain customers.”