UK car insurance premiums see biggest annual drop in over seven years

Comprehensive car insurance premiums have fallen by 16% (£97) since Q3 2020, with motorists now paying £514 on average. This is the biggest annual drop since 2014, according to the latest Confused.com Car Insurance Price Index.

The index, run in association with Willis Towers Watson, revealed that prices have now fallen for six out of the last seven quarters, although the rate of decline has slowed between July and September compared to the first half of this year.

Premiums are now the cheapest they have been since mid-2015, after falling by another 2% (£8) in Q3 2021, according to results from the index, which is based on price data compiled from almost six million customer quotes per quarter.

Stephen Jones, UK property and casualty consulting lead at Willis Towers Watson, commented: “The downward trend in prices has continued for four consecutive quarters, driven primarily by the lower exposures and claims experience resulting from the Covid pandemic.”

“However, the rate at which prices are falling has slowed in the last three months, explained in part by the increased number of commuters returning to driving since the easing of lockdown rules, UK summer staycations, and other changed driving patterns.”

“But, of course, any trends here need to be balanced against the expectations around any rate changes which will be required to fulfil the Financial Conduct Authority’s (FCA) price walking ban.”

From July to September 2021, the cost of comprehensive car insurance has continued a downward trend across every region in the UK, except for the Southwest England, which saw a 1% rise in premiums.

Drivers in the Manchester/Merseyside region benefited from the greatest quarterly drop in prices, with their insurance premiums decreasing on average by 4% to £646, followed by the Northeast and Northwest regions in England, which both saw quarterly falls of 3% and prices falling to £458 and £496, respectively. 

More locally focused data shows that drivers in Dumfries and Wigan benefited from the greatest quarterly fall of 6%, reducing the premiums of drivers in these areas to £319 and £516, respectively.

The next biggest fall was seen in Aberdeen, which experienced a 5% drop in prices, where drivers were paying an average of £352 in the last three months.

West Central London remains the most expensive place in the UK to buy car insurance, with drivers now paying on average £977. 

At the other end of the scale, the cheapest town is also unchanged, with drivers in Llandrindod Wells in Wales now paying an average of £307 in the third quarter of 2021 for comprehensive car insurance.

Male drivers aged 51 to 55 benefited from the greatest price drop, compared to other age groups, seeing a quarterly price decrease of just over 2%, taking their annual premiums to £429. 

Meanwhile, male drivers aged between 17 and 20 and female drivers 71 and over experienced the most marginal of falls, with less than a 1% shift in prices and annual premiums decreasing from £1,434 to £1,424 for male drivers aged 17 to 20 and from £331 to £330 for female drivers aged 71 and over.

Jones said: “The FCA’s price walking ban from 1 January 2022 has received significant senior management attention during 2021 and consumed significant amounts of insurers’ pricing resources. The pricing impacts of these efforts will emerge in the months ahead. Together with the widespread supply chain issues affecting many industries, including automotive repairs, the outlook on pricing for 2022 is extremely uncertain.”

Louise O’Shea, chief executive officer at Confused.com, commented: “It’s likely that prices could start to creep up as people return to work and people are spending more time travelling on the road, which all means the risk of accidents is a lot higher. We’re already starting to see this in some areas of the UK. And this will mean that the overall price of insurance will increase, which means the cost of renewal will too.”

“From January there will be some important changes to the way insurers are pricing customers, and the concern is that customers will accept a flat or slightly lower price and simply choose to renew. But the current savings on offer show that insurers are willing to give consumers a better deal, and even if the market changes, this pattern will likely remain.”

Mark Dugdale