Car insurance prices fall sharply in 2021
- MoneySuperMarket’s latest data puts the average cost of an annual comprehensive car insurance policy at £417 – a seven-year low
- This is a 14% fall compared with twelve months ago (first three months of 2020)
- The fall in car insurance costs has continued during lockdown in 2021 as vehicle usage and accident claims have remained below normal levels
Average car insurance premiums fell by £73 in the first three months of 2021 – putting the typical cost of an annual premium at £417 - the lowest price in seven years.
Car use and motor insurance claims have remained below normal levels for the start of the year largely due to the third national Covid-19 lockdown and Government’s ‘Stay at Home’ rules.
This reduction in the number of cars on the roads has resulted in fewer accidents, so insurers are paying out on fewer claims. It means insurers can offer lower car insurance premiums to attract new business.
The average price of comprehensive car insurance
between January and March
Lockdown and lower vehicle usage has also led to a drop in policy sales. This has increased competition among insurers, pushing down premium prices.
These factors appear to outweigh the impact of any other potential pressures on the cost of car premiums, such as Brexit.
In addition, car insurers have been told by the regulator – the Financial Conduct Authority (FCA) – to provide assistance to customers struggling to make car insurance payments due to coronavirus. This help could take the form of reducing levels of cover to bring down costs or offering payment deferrals. But this means insurers are likely to have kept extra money on the balance sheet to meet the potential cost of this help – and this could lead to an increase in premiums across the market to foot the bill. But to date, this has not been seen.
Combined car insurance premiums
The fall in car insurance costs has continued during lockdown in 2021 as vehicle usage and accident claims have remained below normal levels.
Car insurance premiums over time
““Our research shows that prices fell significantly in the first three months of this year, with the drop in average premiums the biggest recorded during the eight years we’ve been tracking prices. A trend we can put down to car owners driving fewer miles during the pandemic.
“Extra competition for sales is causing insurers to lower premiums, as fewer claims means that insurance is more profitable and providers can therefore reduce prices and pass this benefit on to customers.
“It is great to see these savings being passed onto customers, however it is likely the bubble will burst at some point as lockdown eases and driving – as well as accidents and claims – start to rise again. The latest view is that restrictions will be eased by the end of June this year and many people will return to the workplace.
“It is unclear how many of those who have been working from home during the last year will potentially reduce their time in the workplace. If there is a significant shift, it could mean that we can enjoy lower premiums for longer.
“If your policy is up for renewal, the best way to make sure you’re getting the right policy for your needs, and at the right price, is to always shop around for a better deal as doing so can save you up to £217*.”
Average premiums by region
- East London drivers continue to pay the most expensive premiums in the first three-month period of 2021, at an average of £870
- Across London, motorists pay an average premium of £608
- Drivers in Kirkwall on Orkney in Scotland pay an average of £256, the lowest in the country
One of the biggest factors determining how much you pay for car insurance is where you live. Insurers take your postcode and look at how many claims arise in that area.
In the longer-term, increasingly sophisticated technology should exert further downward pressure on premiums as a result of fewer accidents and fewer claims.
If you live in a busy town or city where there are lots of cars on the roads, there is likely to be a higher risk of accident, so your premium will be higher than for someone living in a smaller town, village or rural location.
Our latest Q1 2021 data shows that drivers living in East London continue to pay the most for premiums at more than double the UK average (£870).
How age and gender affect car insurance costs
- 17 to 19-year-olds pay an average of £505 for a fully comprehensive policy, down 37% in the past 12 months
- Drivers aged between 20 and 24 pay the highest premiums at an average of £871
- Drivers aged over 65 have seen the smallest fall in premiums – just 6% in the past 12 months – to £258
Age also has a major impact on car insurance premiums, with under-25s paying at least double that of the over-50s.
MoneySuperMarket’s latest data shows that the cost of annual premiums has fallen by 37% in the past year for drivers aged between 17 and 19, with fully comprehensive cover now costing an average of £505 a year. Driving tests have been cancelled until current lockdown measures are eased, and fewer new young drivers mean that average premiums have dropped sharply for this age bracket.
It’s now drivers in the 20-to-24 age bracket paying the highest annual premiums at £871, whereas drivers aged 65 or over are paying the lowest average premiums at just £258 a year.
Other factors that affect premiums include your driving history, your occupation, and the make, size and value of your vehicle.
Differences between car insurance costs for women and men are also still apparent, despite insurers no longer being legally allowed to take gender into account according to the European Court of Justice’s Gender Directive.
Irrespective of car insurance premium trends, it remains good practice to shop around when your car insurance comes up for renewal. A little research could result in an average annual saving of up to £217*, so it’s worth comparing car insurance quotes.
*51% of consumers could save up to £217.95 Consumer Intelligence, December 2020
All premium price data is based on the median cheapest on-screen price for the given period that customers see when running a quote. Premiums are based on MoneySuperMarket customers only and are not representative of the UK average. View our electric car insurance index to see how premiums have changed over time for electric vehicles
From October (Q4) 2018 onwards the on-screen price also includes add-ons in line with the Insurance Distribution Directive (IDD).