Car insurance costs drop to seven-year low
The price comparison site’s study found that the cost of a typical policy dropped to £417.06 in the first quarter of 2021. That’s a fall of £73.32, the biggest quarter-on-quarter drop since MoneySuperMarket started tracking this data back in 2013.
It also represents a significant drop from the quarterly high registered at the end of 2016 when average premiums cost a massive £581.77.
Where are prices falling?
In the first quarter of 2021, every region of the UK saw the price of comprehensive cover fall. However, there are notable differences between areas.
In the West Midlands for example the average cost of a premium came to £480.63, which was down by £101.54 from the final quarter of 2020, a 17% drop. This was just ahead of four regions which saw prices fall by 15%: the North West, North East, East Midlands, and Yorkshire & The Humber.
At the other end of the scale, the crown dependencies of Jersey, Guernsey and the Isle of Man saw the smallest price drop of 7%. Despite this, cover is cheapest on the islands, at an average of £276.25, a stark contrast from the average £607.73 paid by drivers in London.
It’s younger drivers that are seeing the biggest premium drops too. The MoneySuperMarket study found that the average cost of a comprehensive premium for those aged 17-19 has dropped by a whopping 37% to £504.85 ‒ that’s more than three times bigger than the falls in any other age group.
The over-65s continue to enjoy the cheapest average premiums, at a cost of £258.23, which is less than a third of the average £870.78 paid by those aged 20-24.
Will prices rise again?
Andy Teasdale, spokesperson for MoneySuperMarket, said that prices were likely falling due to a combination of fewer miles driven during the pandemic, as well as extra competition between insurers.
He added: “It is great to see these savings being passed onto customers, however it is likely the bubble will burst at some point as lockdown eases and driving – as well as accidents and claims – start to rise again.”
Some insurers, like Admiral, chose to provide policyholders with refunds after the initial lockdown, though this was not an approach embraced by many. A study by Which? found that just one in five drivers had been offered a refund on their premiums.
However, it has led to some innovation, with RAC launching a car insurance policy where drivers are charged based on the actual miles they drive, rather than an estimated annual mileage. Co-op has teamed up with By Miles to provide a similar form of cover to motorists.