There’s good news for drivers in London, as the average cost of car insurance has fallen by as much as £58 (6%) year-on-year.
Drivers in Inner London can now expect to pay a staggering £1,220 for their car insurance when buying a new policy, on average, while those in Outer London pay £963 in comparison.
That’s according to the latest car insurance price index by Confused.com (Q4 2020), powered by Willis Towers Watson. Based on more than six million quotes per quarter, it’s the most comprehensive new business price index in the UK.
According to the data, motorists in West Central London are benefitting from the biggest savings in their car insurance costs, and are now paying £1,199, after a significant £172 (13%) drop in prices year-on-year.
Meanwhile, motorists in East London are paying out the most for their car insurance, with the average price in the area now £1,425, after a £18 (1%) drop year-on-year.
In Outer London, it’s drivers in Ilford who pay the most for car insurance, with the average price now £1,254, following a £79 (6%) drop year-on-year.
It’s a similar trend across the rest of the UK, where prices fell by £52 (6%) on average – the steepest price drop in two years. The average cost of car insurance in the UK is now £763, making it the lowest prices have been since early 2019. As the coronavirus pandemic has forced a lot of financial uncertainty onto many households, many drivers have been looking for more flexible options such as short-term temporary insurance, which can be useful for those who need coverage for a specific period of time, such as for a weekend break or for a vehicle that is only driven occasionally. As the country has lived in lockdown for the majority of the past 12 months, people are driving significantly less, and the data suggests prices may have dropped to reflect this. According to further research by Confused.com, UK motorists expect to be driving almost 2,000 fewer miles this year(1), compared with last year, which can have a significant impact on the price they pay for their insurance.
Typically, having a lower mileage could mean drivers pay more for their insurance. For example, a driver with an annual mileage of between 3,000 and 4,000 miles per year would pay £155 more than if they were to drive between 8,000 and 9,000 miles(3). This is because a motorist who drives fewer miles could be considered to be less experienced and therefore a higher risk. However, in the current climate, almost two in three (60%) UK drivers(1) claim they have been using their car less since being in lockdown, meaning the risk on roads has decreased overall.
The beginning of the coronavirus lockdown signalled a significant drop in car insurance prices (£39 between Q1 and Q2 2020), and prices have remained steady since, with only a £7 difference between Q2 and Q4. But before the pandemic picked up pace in the UK last March, prices were at a two-year high, which explains why drivers are now seeing such significant savings when shopping around. And drivers who are due to renew in the next three months (Q1 2021) could also make a saving. Those who bought a new policy in the first quarter of 2020 will have paid £809, on average. If prices stay stable over the next three months, this means they could save as much as £46, on average, by shopping around for a new policy.
However, further research by Confused.com(1) suggests that motorists who choose to renew with the same insurer may not see the same savings. In a survey of 2,000 UK drivers, more than two fifths (42%) of those who were due to renew over the past quarter (Q4 2020) said their renewal price was more expensive than the previous year, with insurers adding an extra £49 to their price, on average. Worryingly, nearly a quarter (24%) chose to stay with the same insurer, despite their price being more expensive. But two in five (40%) shopped around using a comparison site and saved £60, on average.
Louise O’Shea, CEO at Confused.com, explains that this proves that it doesn’t pay to stay loyal. And new rules set out by the Financial Conduct Authority will make it even easier for consumers to cancel the automatic renewal of their policies and switch to a better deal(2). Currently, customers who don’t actively seek out a new price will be automatically renewed on their existing policy, at the price which is set out by the insurer. And it’s clear from Confused.com’s research that many motorists are seeing their price increase year-on-year, meaning they’ll be paying out more money when there is likely to be a better price for them on the market. But the FCA’s proposal will not just make it easier to cancel auto-renewals, it is also set to prohibit insurers from calculating a price based on whether the customer is a new customer or a renewing customer. However, this does not mean that renewal prices will stay the same or decrease, they could still increase year-on-year. The FCA have been clear that shopping around will still give customers opportunities to save.
Some drivers are seeing bigger savings than others – particularly male motorists. The average cost of car insurance for men in Inner London is now £1,285, following a £44 (3%) decrease year-on-year. Meanwhile, prices for women are now £33 (3%) cheaper than 12 months ago. This means female drivers are now paying £1,127 for their car insurance, bringing the gap between men and women to £158, on average(4).
Meanwhile, the gap in prices between male and female drivers in Outer London is slightly smaller, as men pay £1,017 while women pay £897, in comparison, on average. Although it’s men who have seen the biggest savings, with prices now £61 (6%) cheaper than 12 months ago, while women saved £53 (6%), in comparison.
It’s a similar picture for male and female drivers across the rest of UK, with the average price for men now £799, and £718 for women. This means men are now paying £81 more for their car insurance – the smallest gap in five years.
Similarly, prices have decreased for most age groups in the UK, and most significantly for those in their early twenties. In particular, 21-year-olds are now saving £125 (8%) compared to this time last year, but are still paying a staggering £1,525, on average. But prices are even higher for 20-year-olds in the UK, who pay £1,738, which is still £109 (6%) cheaper than 12 months ago.
However, this is still significantly cheaper than the price paid by younger drivers. In fact, 18-year-olds are forking out a whopping £2,136, while 17-year-olds pay £1,984, on average. These are the only two ages groups in the UK where prices have increased year-on-year, and they are now paying £6 and £13 (1%) more than 12 months ago, respectively. Similarly, younger drivers saw significant increases quarter-on-quarter, with prices accelerating by £73 for 17-year-olds, £60 for 19-year-olds and £45 for 18-year-olds in the space of just three months, on average.
That said, there are also some older age groups where prices have increased for drivers. For example, 68-year-olds in the UK are now paying £15 (3%) more than three months ago, forking out £529, on average. Similarly, many older drivers are paying slightly more this quarter.
While the cost of car insurance is cheaper now for most drivers, it’s clear not everyone is off the hook, which proves the importance of shopping around to find the best deal.
