Although premiums fell steadily between 2012 and the end of last year, motor insurance inflation is back – and an imminent tax rise will only make matters worse.
Motorists across the UK are facing significantly higher car insurance premiums, with the days of falling prices appearing to be over.
This is the gloomy picture painted by findings from the latest Confused.com car insurance price index in association with Towers Watson.
It shows that the cost of a typical comprehensive policy has risen by more than 8% in the past 12 months.
Sharpest rise in five years
This takes the average price of annual cover during the third quarter of 2015 to £629, a rise of £47 on the same three-month period last year.
The research means that three years of declining premiums have finally come to an end: between the start of 2012 and the end of last year, typical prices fell in 12 consecutive quarters.
The rise between July and September this year is the sharpest increase recorded since the end of 2010.
To make matters worse, these hikes in the cost of insurance come ahead of the government’s planned increase in insurance premium tax (IPT).
Tax increase due soon
From the start of November, the rate of IPT on motor policies as well as other types of general insurance such as buildings and contents cover will rise from 6% to 9.5%.
This is likely to add more than £20 to the price of the average car insurance policy.
The latest edition of the price index has revealed significant differences in premium price changes among various age groups.
Although younger drivers face the highest insurance costs, the increases they have seen in recent weeks are among the lowest.
Older drivers bear the brunt
For example, the typical comprehensive policy for a 17-year-old is now £1,916, but this is just a 0.3% or £6 increase on last year.
For older motorists, however, the picture is quite the reverse: the typical 68-year-old, for example, now pays £439 a year for cover.
But this represents an annual price increase of £59 or 15.3%.
Meanwhile, over the last three months alone, drivers aged 60 have experienced an 8% rise in premium costs from £364 to £393.
West is worst
In geographic terms, drivers in the West Country have suffered the largest price hikes.
In Bath, for example, premiums are up 14.7% year-on-year, while in neighbouring Bristol motorists are now paying almost 13% more than this time in 2014.
Steve Sanders, finance director at Confused.com, said: “It would seem that the days of cheap car insurance really are over.
“Just like six years ago, we’re seeing substantial increases in prices for most UK motorists, with only the very youngest of our driver profiles being relatively unaffected.
‘Inflation into 2016’
“And with the government’s increase in insurance premium tax, rising from 6% to 9.5% in November, we’re likely to see continued inflation in car insurance prices across the rest of 2015 and into 2016.”
Sanders added: “As ever, our advice to all drivers is to shop around at renewal using a site such as Confused.com, to make sure that they are getting the very best prices without compromising on levels of cover.”