Sharp rise in car insurance costs
It stood at £110 for the three months to February 2016 after seeing a rise of 4% on the previous quarter.
The average car insurance premium is now £682.26, while the cheapest premium stands at £571.68. According to Comparethemarket.com’s motor insurance index, this is the largest gap since records began in 2012.
The percentage difference between the cheapest and average premiums hasn’t seen such a significant spike as both rose in equal measure.
Last year was a difficult year for drivers who faced premium hikes of £71, compared to a £2 increase the year before. The cheapest policies rose by £56 in 2015.
However, the price rises hit the youngest generation hardest with the average premium for those aged under 30 now standing at £1,094.
Insurance Premium Tax hike
Simon McCulloch, director of insurance at Comparethemarket.com, said: “Many motorists will be disappointed to see a sharp rise in their annual car insurance premium. Whereas prices prior to this year remained stable, 2015 saw premiums rise fairly quickly. The challenge of reducing high insurance costs has fallen almost entirely on drivers to reduce their bills by switching.
McCulloch said that the Insurance Premium Tax (IPT) hike also affected pricing, noting “it’s no coincidence that when the 3.5% tax hike was announced, premiums began to rise”.
While the government’s intention may have been to tax insurers, it seems that most providers have simply had to pass on these additional costs in full to customers.