Insurance
Car insurance cost at lowest level in six years
The average price of motor insurance in 2021 was at a six-year low, but a trade body warns pressure on premiums will filter through to higher costs for drivers.
The average price paid for comprehensive car cover was £434 in 2021, a 7% fall and lowest level since 2015.
According to the Association of British Insurers’ (ABI) motor premium tracker, despite the average cost rising £11 to £440 in Q4 2021, it was still 3% lower than the same quarter in the previous year.
But the ABI said the rise in premiums at the end of 2021 highlight the “continued cost pressures on insurers could be starting to filter through into the cost of cover”.
It said that between 2015 and 2020, the average amount paid for damage to policyholders’ vehicles increased by 59% and the average paid to third parties for damage to their vehicles rose by 32%.
Supply chain issues are also a factor, and with more people taking to the roads as they head back to the office, claims are expected to rise.
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Further, a rule change on the pricing of motor and home insurance introduced on 1 January by the regulator, the Financial Conduct Authority, could lead to some drivers paying higher prices if they currently receive new customer discounts.
This is because insurance companies are banned from quoting customers a higher price for renewing their home or motor insurance than they would pay if they were a new customer. Talk to several companies before you choose a Car Insurance Provider to ensure you’ll get a great deal.
Laura Hughes, the ABI’s manager, general insurance, said: “While we expect the motor insurance market to remain highly competitive in 2022, rising costs for parts, repairs and other supplies and services will continue to put pressure on premiums for motor insurance for both new and existing customers.
“Insurers appreciate that many households are facing a cost-of-living squeeze with rising household bills as costs rise in other areas of the economy, and they will be doing all they can to ensure competitively priced motor insurance, in the face of the variety of cost pressures faced.
“While the FCA pricing rule changes may well lead to fewer introductory discounts, it should still pay to shop around for the best deal for your needs.”