Drivers set to pay £100 more for their car insurance this summer
The months between May and August are historically the most competitive time to renew motor insurance, while premiums peak in December.
However, according to comparethemarket.com’s quarterly motor insurance index – Premium Drivers – the industry’s seeing lower levels of competition and higher premiums than expected.
It found that the gulf between the cheapest and average premiums available in the market hit 17% in May, an increase of £114 from March – marking the greatest gap since December 2013.
In previous years, comparethemarket.com‘s research has shown a decline between the cheapest and average premiums after the peak price month of December, suggesting that competition increases into the summer.
However, the savings variable in March, April and May this year was consistently higher than December’s figure – a pattern not previously seen in the Premium Drivers index.
Motor insurers may be starting to feel the effect of the Chancellor’s announcement in his last Budget that Insurance Premium Tax (IPT) would rise to 10% from 1 October this year, having already been increased from 6% to 9.5% in November 2015.
As prices are continuing to rise as we move further through the year, the firm said it indicates a “hardening market” and the “possibility of higher premiums in the future”.
Over the past 12 months the average premium across all age groups has jumped more than £100 from £594 in May 2015 to £698 last month.
On a quarterly basis, the average premium between March and May 2016 stood at £679, while the cheapest premium reached £564. The difference between the average and cheapest premiums has risen every quarter since March – May 2014 when the price difference stood at a lowly £87.
Simon McCulloch, director at comparethemarket.com, said: “The reality is that, by renewing your car insurance this summer you are effectively paying a higher amount of well over £100, or over £300 if you are a young driver.
“This is especially true for those insuring their car in the summer and is a cost which few motorists would wish – or can afford – to bear. Many customers roll over their policy each year even though there are significant savings to be made by shopping around. Ultimately, to get a better deal, consumers could shop around for lower prices and switch provider.”