UK car insurance premiums down by 14% in last 12 months

Comprehensive car insurance premiums have fallen by 14% (£87) since Q1 2020, with UK motorists now paying £538 on average, according to the latest Car Insurance Price Index.

This is the biggest annual drop since 2014 and the fourth largest decrease in 15 years since the Confused.com/Willis Towers Watson index was launched in 2006.

Premiums are now the cheapest they have been since 2015, after falling by 7% (£37) in Q1 2021, according to results from the index, which is based on price data compiled from almost six million customer quotes per quarter.

This quarter also sees the introduction of an updated calculation methodology, adopting the latest machine learning techniques to ensure the index continues to provide the most accurate view of today’s market. For this reason, comparisons with results from this quarter have been calculated based solely on values generated by the new index.

Graham Wright, UK lead of property and casualty personal lines pricing at Willis Towers Watson, commented: “The scale of the reduction in premiums seen over the last quarter reflects the realities of notably better claims experience under successive Covid-19 lockdowns. The measures have continued to have an impact on the number of drivers on the road—particularly learners—and the miles driven, leading to fewer claims.”

From January to March 2021, the cost of comprehensive car insurance fell across all regions in the UK by at least 4%.

Drivers in Northwest England and the Leeds/Sheffield region benefited from the greatest quarterly drop in prices, with their insurance premiums decreasing on average by 8% (£47) to £521 and 8% (£54) to £619, respectively.

More locally focused data shows that drivers in Huddersfield and Blackburn both benefited from the greatest quarterly fall of 10%, reducing the premiums of drivers in these areas to £581 and £674, respectively.

Drivers in Llandrindod Wells experienced the smallest drop in prices of 1% (£3), where drivers were paying an average of £333 in the last three months. The cheapest town is now Kirkwall in the Scottish Highlands, where drivers were paying an average of £317 in Q1 2021 for comprehensive car insurance. West Central London is now the most expensive place in the UK to buy car insurance, with drivers paying £1,049.

Male and female drivers aged 71 or over benefited from the greatest price fall, compared to other age groups, seeing a 9% quarterly price decrease, taking their annual premiums to £410 and £346, respectively.

Meanwhile, male drivers aged between 21 and 30 experienced the smallest drop in prices of 5%, with annual premiums decreasing from £1,165 to £1,108 for those aged 21 to 25, and from £897 to £853 for those aged 26 to 30. 

Wright said: “The easing of Covid-19 restrictions and ongoing pandemic conditions naturally create further uncertainty in pricing for future claims experience. However, the bigger forward-looking challenge for insurers and intermediaries alike is the pricing action needed in the run up to the implementation of the FCA’s GI Pricing Practices remedies at the end of the year. This will cause the uncertainty in market pricing levels to continue for months to come.”

Louise O’Shea, chief executive officer at Confused.com, commented: “It’s been just over 12 months since we first went into lockdown and the effects of changed consumer buying habits have been reflected in the sharp drop in insurance premium costs. The impact of fewer drivers on the roads has led to fewer claims, which has allowed shoppers to see some of the biggest savings on their car insurance in almost six years. The sensitivity of the current economic climate means that these savings couldn’t come at a better time.”

“While the country is starting to re-open, it’s still likely that the changes to our driving behaviour will continue for some time. And as insurers react to industry changes, it’s natural that insurance offerings and pricing are reflective of customers behaviour and changing needs.”

Mark Dugdale