Car insurance prices accelerate to most expensive since early last year
The cost of car insurance increases at a faster rate following second quarter of price increases
Posted on 15 Jan 2019
• The cost of car insurance in the UK is increasing at a faster rate, up +£14 (+2%) to £774 over the past three months, as the UK enters a period of economic uncertainty.
• More than half (57%) of UK motorists who renewed their car insurance between October and December (2018) said their renewal price was more expensive than the previous year, going up by £48, on average(1).
• Confused.com research reveals the ‘loyalty penalty’ prevails amid FCA(2) and CMA(3) investigations.
• As the post-Christmas pinch tightens, Louise O’Shea, CEO at Confused.com, urges drivers to check their renewal price and shop around before committing to renewing as insurers fail to reward loyalty.
• The gap between prices for male and female motorists increases to almost £100 despite EU Gender Directive.
Motorists across the UK will be feeling the pinch of rising car insurance costs, as the average price accelerates to the most expensive since the beginning of 2018, according to new data.
The cost of car insurance rose +2% over the past three months – equivalent to +£14 – to £774, on average. That’s according to the most comprehensive car insurance price index in the UK based on more than six million quotes a quarter from Confused.com and powered by Willis Towers Watson.
This is the second consecutive rise since a brief period of softening prices which began in Q3 2017. And prices are increasing at a faster rate than three months ago, when they crept up by just +1% (+£8) over the quarter (Q3 2018) in comparison. While car insurance is still -6% (-£53) cheaper than 12 months ago (Q4 2017), with the speed of price-rises accelerating, it could be that the worst is yet to come.
It seems motorists who stay with the same insurer are already starting to see these increases reflected in their renewal price. A nationally representative survey of UK drivers found more than half (57%) of motorists who renewed their car insurance in the last quarter (October – December 2018) saw their premium go up by £48 when they opened their renewal notice(1), on average, as insurers fail to reward loyal customers. However, worryingly, more than half (56%) of drivers who renewed their insurance during these months stayed with the same insurer, suggesting they did not seek a better deal elsewhere.
The Confused.com research comes in the wake of investigations by the Financial Conduct Authority (FCA)(2) and Competition and Markets Authority (CMA)(3), which are unveiling ‘loyalty penalties’ being charged to customers who choose to stay with the same provider, rather than shopping around. And with the post-Christmas pinch beginning to tighten and the UK in a period of economic uncertainty, Louise O’Shea, CEO at Confused.com is urging drivers to check their renewal price and shop around to find a better deal. To further incentivise drivers to do their research this January, Confused.com is giving motorists the chance to save even more by guaranteeing to beat their car insurance renewal price, or give them the difference, plus £20(4).
As prices start to ramp up at a pace, motorists will be feeling the pinch when shopping for car insurance, although some more so than others. In particular, car insurance is more expensive for men out of the two sexes, with the gap between prices for male and female drivers increasing to almost £100. The cost of car insurance for male motorists increased +£15 (+2%) over the quarter, bringing the overall average to £817. This opens the gap between prices for men and women to an eye-watering +£98 difference since the last quarter (Q3 2018), with women paying £719 in comparison, on average. This is +£11 (+2%) more than they were paying three months ago.
While the EU gender directive prohibits insurers from assessing a driver based on their sex, there are other risk factors which cause men to have higher premiums(5). For example, men tend to drive more expensive cars with larger engines and loaded with new technology, on average, which makes for higher-value claims. They also tend to have significantly more motoring convictions than women, as highlighted in Confused.com’s ‘Gender Gap in 100 Drivers’ research. However, it is unclear whether these laws will remain post-Brexit, which could result in the gap widening to the same scale seen before the EU Gender Directive was introduced, where men were paying up to £121 more for their car insurance (Q4 2011).
While the cost of car insurance is going up for the majority of motorists, drivers of a certain age are bearing the brunt of increases more than others. In particular, 68-year-old drivers saw the biggest quarterly hike in the cost of their insurance, with the average price increasing +8% - equating to +£41 – over the past three months to £544. This is just -£22 less than the most expensive price paid by drivers this age in Q3 2017. Motorists aged 59 and 67 also saw significant increases in their car insurance costs this quarter, with both ages seeing an extra +7% on top of last quarter’s price, equivalent of +£35 and +£30 respectively.
However, not all motorists will have seen these increases when quoting for car insurance. In particular, the price of car insurance for 17 year olds has in fact dropped to the lowest since 2006, offering some respite for young and potentially new drivers. The average cost of car insurance for motorists of this age dropped -£349 (-16%) year-on-year, and -£98 (-5%) since three months ago, but is still an eye-watering £1,855.
Looking to the regions, most areas of the UK saw their premiums increase over the past three months. But none more so than Northern Ireland, which has seen pricing trends reverse for the first time since mid-way through 2017, with car insurance costs surging once more. Previously, the region was one of very few where prices decreased over the quarter, while the rest of the UK saw prices creep up. However, this quarter, the cost of car insurance in Northern Ireland saw the average cost of car insurance accelerate the fastest, with prices now +£58 (+7%) more expensive than three months ago. Prices in the region are now edging closer to the £1,006 paid by motorists just 12 months ago, with the average cost of car insurance now at £931.
Meanwhile, prices at the top and tail of the UK bucked the trend and dropped over the quarter. Prices in the Scottish Highlands and Islands, and South West of England both dropped -1% - equivalent to -£5 and -£8 respectively – since three months ago, and are among the cheapest regions in the UK. The South West, in particular, is the cheapest region for car insurance, which costs just £558, on average. While motorists in the Scottish Highlands and Islands pay £611, on average.
On the other hand, it is drivers in Inner London who face the most expensive car insurance costs, paying £1,169 on average. This is up £12 (+1%) since the last quarter, but is still a whopping -£114 (-9%) cheaper than 12 months ago. Meanwhile, the cost of car insurance in Manchester and Merseyside edge closer towards the £1,000 mark, as prices creep up by +£31 (+3%) to £995, on average. This is the most expensive price paid by drivers in the region in 12 months.
On a more granular level, some areas across the UK saw year-on-year price hikes, despite the UK average falling. In particular, motorists on the Shetland Islands in the Scottish Highlands and Islands will have seen an extra +£53 (+7%) on their car insurance cost, compared to 12 months ago. Motorists in the area now pay £781, to insure their car, on average. Similarly, the cost of car insurance on the Hebrides, also in the Scottish Highlands and Islands increased +£39 (+5%) year-on-year to £756, on average
Meanwhile, motorists in London City will be feeling the biggest pinch when purchasing their car insurance, as prices are up an eye-watering +£214 (+17%) compared to last quarter, to £1,439, on average – the most expensive postcode area in the UK.
While car insurance is on the up, motorists will be breathing a sigh of relief, as motoring costs such as the price of fuel has eased, making January that little bit more bearable. The cost of fuel started to increase rapidly over the course of 2018, but have been dropping significantly since October, according to Confused.com’s fuel price index. Petrol in particular has become more affordable, dropping from 131p/l in October to 123p in December, on average. Meanwhile, the price of diesel dropped from 137p/l to 132p/l over the same period, offering some respite to motorists while car insurance prices continue to burden drivers(6).
Louise O’Shea, CEO at Confused.com comments: “Car insurance prices are gathering momentum and have increased for the second quarter running – and this quarter we have seen prices rise at a much faster pace. This is the last thing drivers need as they face the post-Christmas pinch and as the UK enters a period of economic uncertainty due to Brexit.
“If there’s a time to re-think and refresh your finances, it’s now. A recent investigation by the CMA revealed customers who stick with the same supplier for household services are facing a combined ‘loyalty penalty’ of £4.1bn a year. And with an impending FCA investigation into ‘hidden’ discrimination between car insurance customers on the horizon, the loyalty penalty issue appears to be wider than we first thought.
“Our own research reveals some customers are paying the price for staying loyal to their insurer, with their renewal price coming in more expensive than the previous year. Worryingly, many motorists are renewing without even attempting to shop around.
“All motorists should be shopping around for the best deal, whether they are a new driver or renewing for the tenth year, as there is always another insurer out there willing to offer you a better deal. At Confused.com, we are so certain motorists will be able to find a better price than their current insurer is offering that we are offering to beat their renewal quote, or give them the difference, plus £20(4).
“Please don’t pay more than you have to - take a few minutes to check your renewal letter and get a cheaper price.”
- ENDS -
Notes to Editors:
More than six million quotes are used in the construction of each quarter’s insurance price index - this makes it the most comprehensive insurance index in the UK. Unless otherwise stated all prices referred to are for comprehensive cover.
The following web pages will be updated to reflect the new figures and can be linked to: http://www.confused.com/car-insurance/price-index
1. Statistics obtained from a nationally representative survey of 2,000 UK motorists carried out by One Poll on behalf of Confused.com. The survey ran between 21/12/2018 and 03/01/2019.
3. https://www.gov.uk/government/news/cma-to-investigate-loyalty-penalty-super-complaint https://wearecitizensadvice.org.uk/loyal-consumers-are-being-ripped-off-to-the-tune-of-4-1-billion-2d5ec385541c
4. https://www.confused.com/beat-your-renewal. Must be a like-for-like policy. Terms and conditions apply.
5. Car insurance for men is on average higher than for women, for example because certain male-dominated occupations are higher risk to insurers, which is reflected in the premium charged. Also, on average, men drive larger and more costly vehicles. For example, according to Confused.com’s quote data, the average female driver’s car has a 1500 cc engine, compared to 1800 cc for men. Women are most likely to quote for an engine between 1200-1600 cc, men are most likely to quote for a 1600-2000 cc vehicle. Men have twice as many motoring convictions as women. Men drive, on average, vehicles around 10% older and more expensive than women. When men make claims their value averages 15% more than women.
6. Confused.com’s fuel price index collates prices from 7074 out of 8496 fuel stations across the UK. Prices are updated every week: https://www.confused.com/on-the-road/petrol-prices/fuel-price-index.
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