Good news for drivers as car insurance gets cheaper
The average annual motor insurance premium fell to £629 in Q2 2021 – the cheapest quarterly average since 2015.
The latest data from Compare the Market found that car insurance premiums have fallen by an average of £74 year-on-year from Q2 2020 with Covid-19 travel restrictions in place during both periods.
The average premium is also £24 cheaper than the previous quarter in winter, and a substantial £126 cheaper than before the Covid-19 restrictions were introduced in March 2020.
The decrease in the cost of car insurance has is in part due to the significant drop in car insurance claims during successive lockdowns. Providers of insurance services have been offering particularly competitive prices, with the low numbers of new car sales at the start of the year and the postponing of driving tests resulting in fewer new customers in the market.
The cheapest premium typically available in Q2 2021 has also decreased to £536, dropping from £595 in Q2 2020. This fall means there are still considerable savings available to motorists who shop around for the best price when their policy comes to an end. Compare the Market says drivers can save an average of £92 on their car insurance by switching to the cheapest premium available.
Young drivers can make the greatest savings from shopping around for car insurance policies with sr22 insurance coverage. The average premium for drivers aged under 25 has decreased to £1,093, down from £1,155 in the same quarter in 2020. However, if a younger motorist switches to the cheapest deal when their premium comes up for renewal, they could save £191 on their auto insurance.
Despite the lower premiums in Q2, motorists should be aware the cost of car insurance could rise in the coming months. The average premium has already increased by £47 between March and May 2021.
As further Covid-19 restrictions are lifted, the number of car journeys could increase which insurers are likely to anticipate will lead to more car insurance claims, and subsequently higher premiums.
Dan Hutson, head of motor insurance at Compare the Market, said: “Motorists will be relieved that car insurance premiums have once again fallen since household finances have been under pressure from both the pandemic and the prospect of rising inflation. For those looking to reduce their premiums further, switching insurer is a quick and easy way to reduce the cost when your policy comes up for renewal, especially for younger motorists. Our research shows the difference between the cheapest and average premium is £92 but these savings increase to almost £200 for drivers below the age of 25.
“However, as more cars return to the road, it is worth noting that the cost of insurance could start to increase after rapidly falling in the first few months of the year. As the remaining Covid-19 rules are set to be relaxed and more people head back into the office, we may see more car insurance claims causing the cost of premiums to accelerate back to pre-pandemic prices. Drivers may want to think about switching early to lock in a lower premium if they are not too far from their renewal date. But they do need to be careful to check any penalty charges for switching early don’t outweigh the potential savings from switching.”