Drivers are facing significantly higher car insurance premiums, but it’s still possible to make savings by shopping around.
Car insurance premiums have reached the highest levels recorded since 2020, despite recent changes designed to make insurance pricing fairer.
Here, Which? explains why insurance costs are on the rise and the steps you can take to get a better deal when renewing.
Car insurance premiums rise by £68
have risen by an average of £68 year-on-year, as drivers continue to feel the pinch.
Data from Compare the Market shows premiums averaged £688 in the first three months of 2022, compared to £620 a year ago.
The rise means the cost of car insurance is now at the highest level seen since the last quarter of 2020, when premiums averaged £724.
Alex Hasty of Compare the Market says: ‘Drivers will be disappointed that premiums are less affordable than in previous years as household budgets continue to be impacted by rising fuel and energy costs.
‘Insurance prices began to increase rapidly at the end of last year and premiums have remained high in the first three months of 2022’.
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Drivers could save up to £120 by switching
Compare the Market analyses both the average premiums and cheapest premiums quoted to drivers.
It says the cheapest quotes rose by £42 in the first quarter of the year to reach an average of £568.
The price comparison site says this means drivers could save up to £120 by shopping around to find a better deal.
The savings increase dramatically for drivers aged under 25, who could shave an average of £257 off their premium.
How the end of the ‘loyalty penalty’ affects insurance costs
In January, the Financial Conduct Authority (FCA) introduced new rules to make insurance pricing fairer.
The changes mean that insurers can no longer quote existing customers a higher price than they would a new customer.
The FCA estimated the changes would result in a saving of at least £56 for customers who had renewed their car insurance five times or more.
There is a downside, however. The abolition of the loyalty penalty may protect loyal customers who stay with one insurer, but it also means that those who regularly shop around will no longer benefit from new customer discounts.
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The reasons behind rising insurance premiums
The end of the loyalty penalty isn’t the only factor influencing the cost of car insurance.
The Association of British Insurers says rising prices can be explained by a range of ‘cost pressures’, including the rising average cost of claims.
Other factors include supply-chain issues (resulting in delays accessing replacement parts), a rise in the value of second- hand cars (resulting in higher payouts), and traffic returning to pre-pandemic levels (resulting in a higher number of claims).
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How to get a cheaper deal on car insurance
If your car insurance is up for renewal soon, don’t panic.
Insurers are still looking to be competitive on pricing, and with dozens of providers to choose from, there are plenty of good deals available.
As a starting point, keep the following five tips in mind when looking for car insurance.
1. Search the whole market
Your insurer should send you a renewal quote around a month before your policy is due to end.
At this point, start shopping around on comparison sites to see if you can get a better deal elsewhere. Don’t forget to check out providers that don’t appear on comparison sites, such as Direct Line and NFU Mutual.
Once you’ve found the right deal, you can either press ahead and inform your current provider you’ll be leaving, or call to see if it’s willing to drop its price to make you stay.
2. Don’t take out unnecessary add-ons
Comprehensive policies come with a range of, such as legal expenses insurance, breakdown cover, key cover and personal accident cover.
In some cases, you might already be protected (for example if you have breakdown cover through your packaged bank account). With this in mind, think carefully before accepting optional extras.
3. Set the right excess
When you take out a policy, you’ll set aon top of the ‘compulsory’ excess set by the lender. The combined amount of these two figures is what you’ll need to pay upfront if you make a claim.
Voluntary excesses vary significantly, with £100, £250 and £500 commonly available. A higher excess might lower your premium slightly, but setting it too high may be a barrier to making a claim in the future.
4. Pay annually rather than monthly
Paying monthly for your car insurance will help you spread the cost, but you’ll pay much more over the course of the year.
Monthly payment plans effectively involve taking out a loan with the insurer, and interest rates can be high. If you can pay upfront, it’s well worth doing so.
5. Find the right insurer
The best car insurance policy isn’t always the cheapest. Before settling on a provider, you should ensure it offers a comprehensive-enough policy that provides excellent coverage which will be there for you if you need to make a claim.
We’ve done some of the hard work for you. For our 2022 car insurance reviews, we rated 73 elements of policies and spoke to thousands of customers who’d recently made a claim.
Find out which provider topped the charts in our guide to the.
- We’ve partnered with Confused.com to help you from one of 100+ providers.
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