HomeFinanceCar insurance prices rise 7% in three months as drivers get back...

Car insurance prices rise 7% in three months as drivers get back on the road



Household budgets are coming under more pressure as the cost of car insurance has risen by 7 per cent in the last three months, new research has revealed.

As living costs increase thanks to surging energy bills and rising inflation, motor cover is the latest price hike to add to the list. 

The average cost of car insurance premiums in the UK increased from £412.44 in the period between July and September last year, to £443.67 in the period between October to December, according to comparison site MoneySuperMarket.

This is a 7 per cent rise, or more than £30. 

Households are facing even more rising costs as the cost of car insurance has risen by 7%

Households are facing even more rising costs as the cost of car insurance has risen by 7%

After a major drop in car insurance prices at the start of 2021, prices have been on an upward trend.

Because of the big fall in early 2021, which was a result of renewed lockdown measures, year-on-year prices are still down by 6.6 per cent or £31.14 year-on-year.

Prices could also be set to rise further thanks to new regulations. 

Since January 1, insurers have had to follow new pricing rules enforced by the Financial Conduct Authority, which prevent them from offering new customers cheaper deals than existing ones who renew. 

Many drivers believe the changes guarantee them a cheaper or flat premium, but that is not necessarily the case as insurers may bring the cost of new policies up, rather than reducing premiums for existing customers. 

This means drivers could receive a more expensive renewal price in the coming months.

Looking at premiums nationally, drivers in London continue to have the highest premiums at £616.65.

Those in the North West follow with an average bill of £509.60, whilst motorists in the West Midlands pay £504.76. 

Meanwhile, drivers in the South West pay the least at £295.75.

The biggest quarterly price increase was seen in the East Midlands for a second quarter running, with a rise of 9.4 per cent or £37.03.

QUARTERLY CHANGE IN CAR INSURANCE PRICES
2020 Q4 2021 Q1 2021 Q2 2021 Q3 2021 Q4 QoQ £ Change QoQ % Change YoY £ Change YoY % Change
£474.81 £401.89 £401.52 £412.44 £443.67 £31.23 7.60% -£31.14 -6.60%
Source: MoneySuperMarket             
Prices could also be set to rise further thanks to new regulations that prevent insurers from offering new customers cheaper deals than existing ones who renew, which could see premiums increase in general

Prices could also be set to rise further thanks to new regulations that prevent insurers from offering new customers cheaper deals than existing ones who renew, which could see premiums increase in general 

This is followed by the North East, where drivers saw a rise of 8.8 per cent or £33.31, and Scotland where drivers saw an increase of 8.5 per cent or £27.54.

Drivers in the South West saw a small drop in prices of 0.8 per cent, equivalent to just £2.30.

When it comes to age, younger drivers aged 21 to 24 have the highest average premiums at £857.24.

But drivers of every age group saw prices increase, with those aged between 17 and 19 seeing the biggest jump of 17.7 per cent, equivalent to a rise of £60.35.

They were followed by drivers aged between 25 and 29 who experienced a hike of 8.3 per cent, equivalent to £49.64 and drivers aged between 40 and 49 who saw rises of 7 per cent, a jump of £26.78. 

HOW CAR INSURANCE VARIES BY LOCATION  
2021 Q3 2021 Q4 QoQ £ Change QoQ % Change YoY £ Change YoY % Change
London £594.72 £616.65 £21.93 3.70% -£62.07 -9.10%
North West £488.79 £509.60 £20.81 4.30% -£48.64 -8.70%
West Midlands £476.82 £504.76 £27.94 5.90% -£57.53 -10.20%
Yorkshire and the Humber £444.40 £479.07 £34.67 7.80% -£26.62 -5.30%
Northern Ireland £459.86 £472.15 £12.29 2.70% £5.69 1.20%
East Midlands £394.06 £431.09 £37.03 9.40% -£23.43 -5.20%
North East £377.55 £410.86 £33.31 8.80% -£22.29 -5.10%
East £353.02 £377.62 £24.60 7.00% -£35.98 -8.70%
South East £348.73 £369.55 £20.82 6.00% -£24.98 -6.30%
Wales £332.99 £354.06 £21.07 6.30% -£30.10 -7.80%
Scotland £322.56 £350.10 £27.54 8.50% -£16.35 -4.50%
South West £298.05 £295.75 -£2.30 -0.80% -£24.33 -7.60%
Source: MoneySuperMarket         

Sara Newell, car insurance expert at MoneySuperMarket, said: ‘After a major drop in car insurance premiums at the start of 2021, they’ve been on an upward trajectory ever since, with figures for the last quarter showing the most unwelcome jump yet.

‘If you’re a driver, it’s really important that you stay vigilant to price rises – particularly against the backdrop of price rises across lots of other household bills and consumer goods. 

‘If you’re nearing the end of you policy make sure you shop and around for new deal to avoid losing out.

‘While we welcome the introduction of the FCA’s new measures this month – which prohibit insurers charging existing customers more than new ones – it’s important to recognise that these measures alone won’t save you money. 

‘The only guaranteed way of saving money on your car insurance is to shop around for a new deal.’ 

Meanwhile, comparison site Confused.com has said that its figures show the steepest quarterly increase in car insurance costs in more than four years.

It found drivers can now expect to pay £539 for their car insurance on average, as prices are now £25, or five per cent, more expensive than three months ago.

The data also showed that average prices earlier in 2021 were, at one point, as much as £97 cheaper year-on-year. 

However, the data said that the average cost of car insurance in the UK was now £36 (six per cent) less than 12 months ago, suggesting prices may be returning to pre-pandemic levels.

All figures based on MoneySuperMarket internal data accurate as of September 2021.

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