Car insurance rises to most expensive since start of last year

The cost of car insurance rose by two per cent over the past three months – equivalent to +£14 – to £774, on average, according to the most comprehensive car insurance price index in the UK.

While car insurance is still six per cent cheaper than 12 months ago, with the speed of price-rises accelerating, it could be that the worst is yet to come.

Motorists who stay with the same insurer are already starting to see these increases reflected in their renewal price. A survey of UK drivers found more than half (57%) of motorists who renewed their car insurance between October and December 2018 saw their premium go up by £48 on average. Worryingly, more than half (56%) of drivers who renewed their insurance during these months stayed with the same insurer, suggesting they did not seek a better deal elsewhere.

The Confused.com research comes in the wake of investigations by the Financial Conduct Authority (FCA)(2) and Competition and Markets Authority (CMA)(3), which are unveiling ‘loyalty penalties’ being charged to customers who choose to stay with the same provider, rather than shopping around. And with the post-Christmas pinch beginning to tighten and the UK in a period of economic uncertainty, Louise O’Shea, CEO at Confused.com is urging drivers to check their renewal price and shop around to find a better deal.

As an added incentive, the price comparison site is guaranteeing to beat customers’ car insurance renewal price, or give them the difference, plus £20.

As prices start to ramp up at a pace, some motorists will be feeling the pinch more than others. In particular, car insurance is more expensive for men, with the gap between prices for male and female drivers increasing to almost £100. The cost of car insurance for male motorists increased by £15 (two per cent) over the quarter, bringing the overall average to £817.

While the EU gender directive prohibits insurers from assessing a driver based on their sex, there are other risk factors which cause men to have higher premiums, such as driving more expensive cars with larger engines and more new technology, and having more motoring convictions than women, as highlighted in Confused.com’s ‘Gender Gap in 100 Drivers’ research.

However, it is unclear whether these laws will remain post-Brexit, which could result in the gap widening to the same scale seen before the EU Gender Directive was introduced, where men were paying up to £121 more for their car insurance.

Drivers of a certain age are also bearing the brunt of increases more than others. In particular, 68-year-old drivers saw the biggest quarterly hike in the cost of their insurance, with the average price increasing by eight per cent over the past three months to £544. Motorists aged 59 and 67 also saw significant increases in their car insurance costs.

However, not all motorists will have seen these increases - the price of car insurance for 17 year olds has dropped to the lowest since 2006, offering some respite for young and potentially new drivers.

Amanda Stretton, motoring editor at Confused.com, said: “Car insurance prices are gathering momentum and have increased for the second quarter running – and this quarter we have seen prices rise at a much faster pace. This is the last thing drivers need as they face the post-Christmas pinch and as the UK enters a period of economic uncertainty due to Brexit.

“If there’s a time to be re-think and refresh your finances, it’s now. A recent investigation by the CMA revealed customers who stick with the same supplier for household services are facing a combined ‘loyalty penalty’ of £4.1bn a year. And with an impending FCA investigation into ‘hidden’ discrimination between car insurance customers on the horizon, the loyalty penalty issue appears to be wider than we first thought.

“Our own research reveals some customers are paying the price for staying loyal to their insurer, with their renewal price coming in more expensive than the previous year. Worryingly, many motorists are renewing without even attempting to shop around.

“All motorists should be shopping around for the best deal, whether they are a new driver or renewing for the tenth year, as there is always another insurer out there willing to offer you a better deal. At Confused.com, we are so certain motorists will be able to find a better price than their current insurer is offering that we are offering to beat their renewal quote, or give them the difference, plus £20 (https://www.confused.com/beat-your-renewal. Must be a like-for-like policy. Terms and conditions apply).

“Please don’t pay more than you have to - take a few minutes to check your renewal letter and get a cheaper price.”