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Car insurance costs fall 12.5%

There's good news for cash-strapped motorists as the average cost of car insurance falls by 12.5 per cent compared with a year ago, a typical saving of £91.

Toy Mini motor with British flag and coins 

The average annual cost of a comprehensive car insurance policy now stands at £644 - down from £735 this time last year.

Even more significantly, this price fall represents a £214 or 24.9 per cent drop on when car insurance prices were at a peak of £858 in June 2011.

Confused.com car insurance price index

This is according to the latest quarterly Confused.com car insurance price index.

The index analyses more than four million quotes to reflect what prices drivers have been paying for cover.

This latest index looks at car insurance prices between the start of October and the end of December 2013.

Why are car insurance prices falling?

As Gemma Stanbury, head of car insurance at Confused.com, explains: "Insurance prices are cyclical.

"Prices peaked in 2011, when the average annual cost of car insurance reached £858, but since then the trend has been downwards."

"The fall in prices can also be partly attributed to the European Union (EU) Gender Directive," says Stanbury.

This legislation said insurers had to stop using gender to set car insurance prices from December 2012.

In the past, because women have fewer road accidents than male drivers, women paid less for car insurance as they were less likely to make a claim.

So if an insurer was presented with a male and female driver with the same car, location, mileage and so on, the female would typically have received a cheaper insurance quote than the male.

But following this EU gender ban, the gap between male and female premiums has narrowed over the past year and the overall impact appears to have been to reduce average costs.

Effect of gender ban on car insurance prices

Between October and December last year men paid £671 and women £610, on average, for comprehensive car insurance - a difference of £61.

This compares with a price difference of £112 between July and September 2012, where men paid an average of £807, and women £95, for comprehensive for cover.

Of course, you might wonder why there still differences between men and women.

Gemma Stanbury, head of car insurance at Confused.com, explains.

"Although insurers can’t set prices differently based on gender, there are many factors taken into account when rating for car insurance.

"For example, men typically drive more powerful cars which means their insurance would be more expensive than women.

Car insurance price rises predicted

However, while Stanbury welcomed the fall in the cost of cover, she warns of price rises in coming months.

"Insurance prices can be cyclical and we have seen rates falling for a while now," she explains.

"And the latest car insurance price index highlights that price rises could be on the horizon, with some men already experiencing price hikes in the last quarter.

Price rises for males

"For example," says Stanbury, "between October and December 2013, men paid £671 on average for cover, a fall of 12 per cent compared with the same time last year.

"But if you compare October and December 2013 with the three months prior, certain male age groups have seen small price rises."

Male age groups with quarterly car insurance price rises

Male age groups

Percentage increase in car insurance prices Oct-Dec compared with July-Sept 2013

61-65

3.1%

21-25

2.4%

26-30

2.2%

36-40

2.2%

66-70

2.2%

31-35

1.8%

46-50

0.8%

56-60

0.8%


Stanbury says: "The car insurance price index does give us a good overview of prices as a whole.

"However, car insurance is very much rated on the individual, so we would recommend that drivers shop around on comparison sites like Confused.com to get the best deal.

"By doing so this could be a great opportunity for motorists to take advantage of these latest price drops, not just accept their renewal price."

Read: Does auto-renewal benefit consumers or insurers?

What do you think?

Was your latest car insurance quote lower than the previous year’s?

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Naphtalia Loderick

Naphtalia Loderick

Naphtalia Loderick reports on all things personal finance at Confused.com. She started out on a weekly newspaper, via a national news agency and a stint in the fun but ‘not as glamorous as it appears on screen’ world of TV at the BBC researching consumer films for The One Show.

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