Car insurance on track to be most expensive on record

– Premiums ramp up to £847 on average – just £11 short of highest ever price –

Ogden rate cut1 and Insurance Premium Tax increase2 cause premiums to rise by almost £100 in just four months
Prices accelerate by a staggering 8% (£66) over the quarter and 18% year-on-year (£132)
Premiums set to speed past most expensive average of £858, seen six years ago (Q2 2011)
Gender gap widens to £120 – just £1 short of the pre-EU gender directive gap3
Drivers could save up to £2844 or more by shopping around online using Confused.com

Car insurance is on track to surpass the most expensive prices drivers have ever seen, as premiums soar by almost £100 in just four months.

Motorists’ average premiums have risen to £847, according to Confused.com’s Q2 2017 car insurance price index, powered by Willis Towers Watson – the most comprehensive car insurance price index in the UK based on more than six million quotes a quarter. Figures from the leading car savings site show this is just £11 short of the most expensive premiums on record, six years ago when the average cost was £858 (Q2 2011).

Prices have accelerated by 8% in the last quarter – the biggest quarterly increase in seven years (since Q3 2010) – equivalent to a hike of £66 from £781 at the start of the year (Q1 2017). The rate of the increase can largely be attributed to extra pressures recently imposed upon the industry, including the Ogden rate cut, which sees insurers potentially paying out more for personal injury claims1, and an increase in Insurance Premium Tax (IPT) in June2.

These pressures have also caused the cost of car insurance to rev up 18% annually, equivalent to a whopping £132 price rise since this time last year, which is the biggest annual monetary increase seen over a six year period (since Q2 2011). And, as car insurance costs shift up a gear, it seems likely drivers will see the average premium pass the £1,000 mark by 2018.

Confused.com Car Insurance Price Index

However, it appears the latest car insurance price increases are leaving some drivers more out of pocket than others. Even though the rules prohibit insurers from assessing a driver’s risk based on their gender, there are other risk factors at play which lead men to have poorer claims experience than women, and this is reflected in the price of their premiums. As a result, the gap between what men and women pay for their car insurance has widened even further, with a £120 difference in price. This is just £1 short of the pre-EU gender directive3 gap in (Q4 2011, £121). However, this is linked to the fact that men tend to drive more expensive cars with larger engines, on average, so they make higher value claims. They also have significantly more convictions5 than women.

Both male and female motorists have felt the wrath of sharp quarterly increases, of +9% (£77) and +7% (£53) respectively. Men have now broken the £900 barrier (£901) and are just £7 off paying their highest ever premiums (£908, Q2 2011). While women are paying £781 on average and just £14 less than the most expensive car insurance they have ever paid (£795, Q2 2011).

However, certain demographics have whizzed past the threshold when it comes to sky-high car insurance costs. Those aged between 25 – 42 years old and 54 – 70 years old are paying more than they have ever paid for their premiums. And while younger drivers still have some way to go before they hit the peak, those aged between 17 and 27 years old are now paying over £1,000 for their car insurance, on average.

In fact, younger motorists are bearing the brunt of the price increases. While 18 year olds are still paying the highest premiums of any other age group (£2,334), it’s 19 year olds who will notice the biggest jump with their costs having soared by a staggering £202 (10%) this quarter alone. And 21 year olds have experienced the biggest monetary increase annually, with their car insurance ramping up by an eye-watering £315 (22%) since last year.

However it’s not all bad news, with some respite this quarter for those hitting retirement age, with 66 year olds enjoying some of the lowest premiums of any age group (£467) and also experiencing the smallest quarterly increase of just 4% (£20). This is in comparison to many 65 year olds, who have just stepped off the career wagon, and who saw the biggest quarterly percentage increase of any age (14%, £65).

Looking to the regions, while there is some disparity, no area of the UK seems to have escaped unscathed from car insurance price rises this quarter. In fact, 11 regions – including the East of England, South of England and West of England – are all paying the highest premiums they have ever paid. Car insurance for motorists in Northern Ireland has broken the £1,000 barrier for the first time ever, with their premiums now higher than Outer London and the West Midlands.

And while some areas of Scotland are better off than the rest of the UK, the region has faced a raft of car insurance price rises. Drivers in the Borders of Scotland are still paying the lowest premium (£608) of any region, but only after surpassing the £600 mark and facing the highest annual increase (27%, £129).

Taking a longer term view, it seems motorists in the West Midlands have suffered the most. Drivers in this region are not only paying more than they’ve ever paid for car insurance, they have seen their prices soar by 93% in 10 years and are paying almost double what they were a decade ago.

While motorists are having little respite from the rising cost of car insurance, coupled with other price hikes such as the new rules around road tax for new cars5, one motoring commodity seems to be on the slump – fuel prices. According to Confused.com’s fuel price tool, which collates prices from 83% of the UK’s fuel stations, in April fuel prices reached highs of 119p/l and 120.7p/l for petrol and diesel, respectively, but they have since dropped to 115.2p/l and 116p/l6. This is equivalent to a -3% and -4% dip, which will be welcome news to drivers. However, with recent reports suggesting that the government should raise fuel duty to increase public spending, the reprieve from pound-guzzling fuel prices could be short lived.

Amanda Stretton, motoring editor at Confused.com, says: “Car insurance prices are at tipping point and very soon we expect it will be the norm for drivers to be paying the highest prices ever for their premiums.

“We can’t say that we’re shocked by these figures, as following the Ogden rate cut and hike in IPT to 12%, we knew drivers would be taking a hit. Worryingly, there is every possibility that car insurance prices will be the most expensive on record by the end of the year.

“Since April this year, insurers are required to show drivers at renewal what they paid for their car insurance last year. So, being able to compare the amount they paid the year before, and armed with the knowledge that prices are rising across the board, motorists are better equipped than ever to shop around.

“As many as half of drivers can save up to £284 or more by shopping around at Confused.com, so drivers wanting to make savings should take note of their renewal price and take a few minutes to get a comparable quote online.”