Motor insurance premiums are at an all-time high, with the average driver now paying £776 a year.
According to the comparison website Confused.com, car insurance has increased in price by 18 percent in the past three months, making it one of the most expensive household bills.
Confused.com calculated this figure after analyzing 6 million car insurance quotes.
Price Comparison: Auto insurance is now one of the highest bills faced by troubled households
However, the £776 figure is the average price quoted, not the average premium drivers actually pay.
This is because the premium charged by a price comparison website may change by the time a driver buys the policy, for example if they buy additional cover – but the data gives a good idea of current cover costs.
Confused.com said car insurance is now the third highest household bill, behind council tax and energy.
The average household pays £2,074 a year on utility bills, according to regulator Ofgem.
Why are car insurance premiums rising?
The main reason is higher repair costs. One of the largest costs for insurers is claims.
There were fewer cars on the road during the pandemic. As a result, auto insurance premiums fell, as there were fewer accidents to pay for.
With an increase in driving after the lockdowns ended, insurers are facing more claims.
Not only that, but the cost of recent auto insurance claims has skyrocketed.
Crash the party: higher repair costs after accidents increase all car insurance costs
Auto repairers have experienced a significant increase in their costs, which they have passed on to insurers and, in turn, to drivers.
For example, repairers saw energy bills increase by 300 percent compared to before the cost of living eruption in 2021.
The cost of providing a replacement car has risen by 30 percent and the prices for paint and parts by 16 percent.
The trade association Association for British Insurers reported a 33 percent increase in vehicle repair costs over the past three months.
Louise Thomas, motorcycle expert at Confused.com, said: “Auto insurance has quickly become one of the biggest expenses for drivers. If prices continue at this rate, there is no doubt drivers could be priced off the road as they also struggle with other rising costs.
“But what we do know is that many drivers have been able to save some money when it came to extension. And shopping around was key to this. Even if the prices were cheaper for them, the price they saw online was still significantly cheaper.’
Do all drivers see price increases?
While the average cost of car insurance in the UK is £776, there are some drivers who will pay much more.
The price paid varies quite a bit, based on the gender, location and age of the driver.
For example, the average premium for male drivers is now £827. This is up by £236 (40 per cent) in the last year and £125 (18 per cent) in the last three months.
By comparison, female drivers now pay £690, after an increase of £198 (40 per cent) year-on-year, and £107 (18 per cent) over the quarter.
Similarly, a driver’s location has a huge impact on their price, with some now paying over £1,000 for their car insurance.
A price increase of £299 (42 per cent) in Outer London has brought the average premium in the region to £1,003.
Inner London, however, remains the most expensive region in the UK, with the average driver now paying £1,257.
Meanwhile, the average cost of insurance in the South West is £509, despite an increase of £136 (36 per cent) over the year.
How to save money on auto insurance
Shop
This is the best way to save on car insurance. Drivers can save hundreds of dollars if they shop around when renewing their coverage.
Insurers are not allowed to charge renewing customers more than new customers. That means that if a driver renews, they should be quoted the same – or less – than if they had started a new policy with the same insurer.
But it may still be possible to get a better deal by shopping around.
Consider black box telematics insurance
Black box policies are where the insurer uses a system in your car to track your driving, either a separate device or using the driver’s smartphone. These are designed to reward those who drive carefully.
They can significantly reduce premiums once you start proving you are a good driver. Some insurers even give a discount in advance if you take out a telematics policy.
Be careful with named drivers
Another way to lower premiums is to ensure that only regular drivers are named on the policy.
Adding a young, inexperienced driver can be a false savings, especially if you have a large or more powerful vehicle.
The premium is influenced by the youngest driver and may not have a no claims discount.
Pay annually if you can
When taking out a new policy, drivers are given the choice to pay for the whole year in advance or in monthly installments.
Many opt for the monthly payments because it means you don’t have to part with a large sum of money all at once, but if you can afford to pay your annual premium up front, you can save money.
Your insurer may charge you interest on the monthly installments. It’s worth asking them if there’s a difference and if so, what it is.
Only pay for what you need
Some car insurance policies offer extra benefits, such as a replacement car, windscreen cover, breakdown cover and legal assistance for motor vehicles.
All of these can certainly come in handy, but they will almost always increase the overall cost of insuring your car.
Many consumers who buy supplemental insurance then forget they have it, and some deals are only claimed once every 664 years.
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