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Car insurance costs fall by 24%

The cost of car insurance has fallen by almost a quarter from record highs two years ago, new research has found.

Millions of drivers are benefitting from the cheaper premiums that have resulted from a number of factors.

Benefits of pay-as-you-drive

These include greater take-up of pay-as-you-drive telematics insurance policies, as well as reduced costs associated with personal-injury claims and new rules on prices for men and women’s policies.

The Watson Car Insurance Price Index shows that the average comprehensive premium between July and September this year was £652.

This is 24 per cent lower than the peak of £858 recorded in June 2011.

Contrast with inflation rate

The index looked at more than 4 million quotes to see what prices drivers were getting when shopping around for cover between July and September this year.

Motor premiums have dropped 14 per cent in the past 12 months alone, the figures showed.

By way of contrast, over the past two years prices in the UK economy as measured by the Consumer Prices Index have risen by about 6 per cent.

Currently, the CPI is running at 2.7 per cent a year, according to the most recent official statistics.

Winners and losers

Some groups of motorists have fared considerably better than others, however, when it comes to price changes.

Those aged between 40 and 60 have seen typical premiums fall by more than 15 per cent in the last year, for example.

And young men in Scotland now face costs lower than at the start of 2007.

But the picture for many women who have only recently passed their driving test is not so rosy.

Young women face price hikes

Those aged between 17 and 20 have in fact seen their premiums rise by just over 9 per cent since this time last year, while their male counterparts face costs almost 30 per cent lower.

This is largely due to the effect of new rules over setting insurance prices according to gender.

Since last December, it has been against the law for providers to charge men and women different rates because of their gender.

Men ‘more risky’

In the past, men – especially those under the age of 25 – have faced much higher premiums because statistics suggested they have been more likely to be involved in accidents and make claims.

But following intervention by the European Union, insurers are no longer allowed to reflect this with higher premiums.

As a result, the gap between male and female premiums has been narrowing over recent months, which means cheaper rates for men but higher prices for women.

Black box benefits

Young people have been increasingly opting for a type of car insurance called telematics.

This involves a black-box measuring device being installed in the vehicle, with premiums set according to how sensibly the policyholder drives.

This is thought to have played a part in falling premiums, as is a recent crackdown by the Ministry of Justice on the fees that are paid by insurers when dealing with personal-injury claims.

Gemma Stanbury, head of car insurance at, said: "In the last three months we’ve seen a significant reduction in car insurance prices across the board, seeing premiums drop by an average of 13.9 per cent year-on-year.

‘Welcome news’

"Falling car insurance premiums are welcome news for motorists who may well be feeling the pinch as a result of rising rates of inflation."

Stanbury added that drivers needed to be proactive to ensure they were feeling the full benefit of these premium falls.

This means checking which insurer offers the best rate.

She said: "We would recommend that motorists take advantage of these latest price drops, not just accept their renewal price."

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Car Insurance price index

Chris Torney

Chris Torney

Chris is the former personal finance editor at the Daily Express. He's been a journalist for more than 10 years and contributes to a wide range of finance and business titles.Read more from Chris

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