Drivers see biggest drop in car insurance costs in 6 years


Drivers in the UK are seeing the biggest drop in car insurance costs in almost six years, new data has revealed.

The average cost of car insurance in the UK dropped by £87 – equivalent to 14 per cent – in 12 months, according to data from Confused.com. It found motorists can now expect to typically pay £538 a year for their car insurance.

But drivers have been warned to shop around and not just take renewal quotes, even if they are lower than last year – as they could be missing out on bigger savings from switching. 

The average cost of car insurance in the UK dropped by £87, equivalent to 14%, in 12 months

The average cost of car insurance in the UK dropped by £87, equivalent to 14%, in 12 months

Prices have been steadily declining, as drivers spend less time on the road with the average mileage of UK drivers dropping from 7,239 to 4,113, a decrease of 43 per cent, during the pandemic.

As a result, prices have decreased by £37 in the past three months alone as insurers adapt their pricing to reflect the current level of risk on UK roads.

Fewer people driving regularly means the risk of accidents is lower and insurers paid out less in claims.

However, not all drivers will see these savings as 45 per cent of drivers who received their renewal in the past three months saw their price increase by an average of £45  suggesting they could be paying more by opting to renew with their current insurer.

In fact, of the drivers who saw their renewal price increase this past quarter, 48 per cent chose to stay with their current insurer, despite their price being more expensive.

Of those who stayed with their current insurer, 11 per cent claim the company automatically renewed the policy on their behalf – a practice that makes it difficult for motorists to opt out of their policy and find a better deal.

This is something that is being investigated by the Financial Conduct Authority, which is looking into changes that will make it easier for customers to cancel their policy and benefit from the price savings being reported for new policies.

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, as they could still increase year-on-year. 

Car insurance prices are lowest for those aged 69, who pay an average of £311 per year

Car insurance prices are lowest for those aged 69, who pay an average of £311 per year

Regionally, prices fell across all areas of the UK, but drivers in Manchester and Merseyside are seeing the most significant savings of all.

The cost of car insurance for those in that area decreased by £122, 15 per cent, in 12 months, bringing the average premium for drivers in the region to £708. 

Meanwhile, drivers in Inner London saved £116 – equivalent to 12 per cent – on average when shopping for a new car insurance policy this past year and are now paying £846.

Despite these significant savings, Inner London and Manchester and Merseyside are the two most expensive regions in the UK for car insurance.

At the other end of the scale, the Scottish Borders is revealed to be the cheapest region in the UK for car insurance, with motorists paying £352 per year for their policies, on average, £62, 15 per cent, less than 12 months ago.

Meanwhile, drivers of all age groups will also have seen a drop in price when shopping for car insurance this past quarter.

Those in their early twenties are seeing the biggest savings of up to £141 compared to last year. However, these are still among some of the highest prices paid for insurance by all drivers.

Those aged 18 top the list of having the most expensive car insurance costs, forking out £1,442, despite an £80 drop in prices compared to this time last year.

This is almost five times the amount paid by drivers in their late sixties, with prices lowest for those aged 69, who pay £311 per year, on average, following a £67 drop in prices year-on-year.

Drivers in Inner London saved £116 when shopping for a new car insurance policy this past year

Drivers in Inner London saved £116 when shopping for a new car insurance policy this past year

However, while the price of car insurance is decreasing, some motoring costs are in fact starting to creep up as the UK eases out of lockdown.

Confused.com’s fuel price index suggests that petrol and diesel prices have been on the up since the end of last year with drivers now expected to pay 124p for petrol, on average, 11p more than December 2020.

Meanwhile, diesel prices have increased from 118p to 127p in the same period. With these costs increasing, drivers will no doubt be looking to making savings where they can, starting with their car insurance.

Louise O’Shea, CEO at Confused.com, said: ‘It’s been just over a year since we went into lockdown for the first time and this triggered a lot of changes in how we’re using our cars. This is a change that could be here to stay for the foreseeable future, so it only seems right that our car insurance costs are cheaper to reflect this.

‘What we are seeing is the biggest drop in prices in almost six years. But it’s important to remember that these lower prices are only benefiting those who shop around. It’s clear from our research that automatically renewing could in fact cost you more money.

‘But if the increase is small, or you are fortunate to see your renewal price drop, please don’t settle for this as there will be an insurer out there willing to offer a better price.’

The research was compiled from more than six million quotes on the Confused.com’s website. 

Compare home insurance, car insurance and travel insurance

Beat the renewal blues and compare the best deals for home insurance, car insurance, travel insurance as well as pet, motorbike and van insurance with This is Money’s partner, Compare the Market. 

Could you save hundreds of pounds a year? Use the tool to check.

>> Check to see if you can start saving money now  

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

Leave a Reply