Car insurance prices fall in the first 6 months of 2020
- MoneySuperMarket’s latest data puts the average cost of an annual comprehensive car insurance policy at £475
- This is a 6% fall compared to six months ago (last three months of 2019), and 2% lower than 12 months ago
- Decreases in car insurance costs are linked to reduced vehicle usage during Covid-19 lockdown, which resulted in fewer accident claims
Average car insurance premiums fell by £28 during the first six months of 2020, according to the latest data from MoneySuperMarket – putting the typical cost of an annual premium at £475.
Despite the tail-end of 2019 seeing a marked hike in car insurance costs of around 6.5% – due to insurers’ responses to the reduction in the ‘discount rate’, a figure applied to high-value personal injury car insurance claims – premiums are still more than £11 cheaper compared to 12 months ago.
However, the Covid-19 lockdown was in full swing during the second quarter of 2020 – and is likely to be a significant contributory factor. In fact, April, May and June may have represented the most unprecedented three months in the history of modern motoring.
The average price of comprehensive car insurance
between April and June
According to figures from motoring group, the AA, the volume of traffic on the roads at the start of lockdown (23 March) was just 35% of pre-coronavirus levels – rising to around 75% by the end of June.
This sudden and unprecedented dearth of cars on the nation’s roads resulted in fewer accidents and fewer claims, putting downward pressure on the cost of car insurance premiums for new policies. This far outweighed any other potential factor on the cost of car premiums, including the fallout from the UK’s departure from the EU back in January.
That said, car insurers have needed to keep some back ‘in the coffers’, following orders on 18 May from industry regulator the Financial Conduct Authority (FCA) to provide assistance for their customers struggling to make car insurance payments due to coronavirus.
While not in every case, financial help could take the form of payment deferrals of up to three months – and with applications open until at least 18 August, this may mean insurers put the brakes on further premium falls.
The true impact of Covid-19 on car insurance premiums will only become evident in the fullness of time, but as our Q2 figures demonstrate, it already appears to be filtering through into real cost reductions for consumers.
Combined car insurance premiums
According to figures from motoring group, the AA, the volume of traffic on the roads at the start of lockdown (23 March) was just 35% of pre-coronavirus levels – rising to around 75% by the end of June. This sudden and unprecedented dearth of cars on the nation’s roads resulted in fewer accidents and fewer claims, putting downward pressure on the cost of car insurance premiums for new policies.
Car insurance premiums over time
““Our research shows that it’s likely coronavirus is a major contributor to the fall in car insurance premiums. With fewer cars on the road, there have been fewer claims, exerting a downward pressure on prices. It’s a pressure that has far outweighed other factors - such as the UK’s departure from the EU - that some expected could have led to premium prices increasing.
“Quite how long this downward trend will continue is hard to say. As we emerge from lockdown, roads will become busier and claims will start to rise again – which may well lead to prices climbing back up.
“Whatever happens to premiums in the coming months, if your policy is up for renewal, make sure you shop around for a better deal – doing so can save you up to £270 on your annual premium*.” ”
Average premiums by region
- East London continues to experience the most expensive premiums in the second three months of 2020 at an average of £964*
- Premiums rose most sharply for drivers on the Isle of Man, where drivers will pay an average of £53 more than the last quarter
- The biggest fall was in the City of London, where premiums dropped by £103 or 12%
*Excluding West Central London, where average premiums were £981 but there were less than 300 enquiries
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 from 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 Q2 2020 data shows that drivers living in East London pay most for premiums at more than double the UK average (£964). (London as a whole paid an average premium of £683).
More areas of the UK saw premium falls than rises in the second quarter of 2020. The biggest fall was recorded in the City of London where drivers are paying 12% (or £103) less on average than they were three months ago. However, the data is derived from fewer than 400 enquiries from the area.
While premium rises were less prominent, some locations took the brunt of the hikes. In the Isle of Man for example, average premiums climbed by 20% (£53) during the second quarter – although data was derived from just 300 enquiries.
How age and gender affect car insurance costs
- 17 to 19-year olds pay an average of £777 for a fully comprehensive policy
- Drivers aged between 20 and 24 pay the highest premium at an average of £913
- Average premiums across all age groups were lower in the second quarter of 2020 compared to the previous three-month period
Age is another major factor when calculating 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 20% in the past three months for drivers aged between 17 and 19, with fully comprehensive cover now costing an average of £777 a year.
But drivers of all ages saw reductions in premiums in the second quarter of the year compared to the previous three-months – and while 20 to 24 year-olds are paying the highest annual premiums at £913, they are still 6% or £62 cheaper than the previous three months.
Other factors on premiums include driving history, 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 when setting premiums, thanks 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 £270*, so it’s worth running a new quote.
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.
From October (Q4) 2018 onwards the on-screen price also includes add-ons in line with the Insurance Distribution Directive (IDD).
*51% of consumers could save up to £269.82 Consumer Intelligence, March 2020