Good news: Car insurance premiums at 18-month low!

After years of only heading in one – the wrong – direction, car insurance premiums are finally starting to fall.

At MoneySupermarket we’ve analysed over 16million quotes run through our price comparison facility in the 12 months to June, and found an average decrease of over 10%. Over the past 18 months, the national average car premium has fallen from the wrong side of £550 to £478.

No room for complacency

That’s splendid news for cash-strapped drivers – especially with fuel prices once more heading north of the dreaded £1.40 a litre mark – but it is not a reason for complacency.

If you’re coming up to renewal, don’t assume your current insurer will pass on any reduction and reward you for your loyalty – it’s highly likely it won’t. You’ll need to shop around to find an insurer that will offer you a competitive deal.

The fall in average premiums comes on top of the hefty savings you can expect to secure by using our price comparison service. Our data shows that drivers can typically save over £400 just by going into the market and benefiting from competition between insurers.

Horses for courses

Not everyone pays £400 a year, of course, but remember this is an average saving across all drivers throughout the land. I was quoted a renewal premium of £420 by my existing insurer back in May but I decided to check via our quote comparison service and switched to another insurer for £190.

I couldn’t believe the saving and even asked the new insurer to check they’d done their sums right. That’s a powerful indication of the substantial nature of the savings on offer for shopping around.

It’s also worth adding that I’d been with my previous insurer for nine years, paying a little bit more each year, with no thanks in the way of a price cut.

My inertia, my fault, my loss – but it shows how insurers have become adept at making it easy and quick to renew, especially if you pay by direct debit. So don’t fall into the trap and renew without checking. I can’t bear to tot up how much money automatically renewing has cost me over the years, but you can be sure I won’t waste any more!

Winning the fight against fraud

But enough about me. You’re probably wondering why insurers are suddenly more willing to compete for motor insurance policyholders when they claim to have been losing money on this class of business for years. One reason is that they are beginning to win the fight against motor insurance fraud.

Fraud has become a huge headache for insurers and for honest motorists, adding an estimated £50 a year to the cost of every policy. But the government has introduced its Continuous Insurance Enforcement scheme to crack down on uninsured driving, and greater efforts are being made to identify fraudulent claims for personal injuries following an accident.

In some instances, injuries (and thus claims for compensation and medical costs) are exaggerated following genuine minor bumps. In others, the accidents are ‘staged’ to replicate the circumstances under which a claim or multiple claims could be submitted. For instance, the car in front of you (with five adult occupants – how often do you see a car that full?) will slam on its brakes at a roundabout, forcing you to collide into it.

Next thing you know, your insurer has received five claims for serious whiplash from the ‘victims’, while you suffered little more than a dent to your bumper.

An extreme example was when a coach-load of people was hit by a car while on the way to greyhound racing. The car driver was unhurt, but – hey! – every occupant of the coach was stricken by whiplash.

The government, working with the insurance sector, is introducing a scheme that clamps down on ambulance chasing ‘claims-farmers’ and bans the payment of referral fees between insurers, lawyers, accident management firms, car-hire outfits and garages. All the money sloshing around the system had to come from somewhere – and that somewhere was your premium.

Better cars, better premiums

Another factor helping reduce the amount insurers are spending on claims – and thus enabling them to reduce their premiums – is that we are driving more robust cars that withstand accidents better (which makes the whiplash epidemic all the more ludicrous). So whereas a car might once have been written-off, it can now be repaired more economically.

While all these factors come into play when insurers are calculating your price, it is your personal details, and those of the car you drive, that have the major impact.

Our analysis shows that where you live is hugely important in determining cost. Less densely populated districts, where there are fewer cars on the road (rural Scotland, for example), enjoy lower premiums, while drivers in London get clobbered, not only because of the busy roads but also because of the higher instances of car crime.

MoneySupermarket Motor Monitor

Currently, all regions of the UK have seen car insurance price deflation, but this may not continue. Our newly-published MoneySupermarket Motor Monitor revealed motorists in Cleveland saw an average 14% reduction to the cost of their car insurance premiums between 2011 and 2012 – the biggest decrease across the country.

Motorists in Harrogate and Shrewsbury have also experienced similar decreases of 13.6%. London saw the smallest decreases to the cost of car insurance premiums, with West London only seeing a 3% decrease in comparison to the national average of 10.6%

Drivers in Greater London suffer the highest car insurance premiums in the UK, with average prices of £748. North West England has the second highest prices, averaging £592, followed by the West Midlands which stand at £516 on average. Drivers in South Scotland have the cheapest UK car insurance premiums of £309 on average, some 59% less than the price paid by drivers in Greater London.

Wherever you live, though, the message is the same: savings are to be had if you shop around.

Changing times

Among the other important factors affecting your premium is your age, your gender and your line of work. For instance, younger drivers pay more because, statistically, they are more likely to be involved in an accident – especially if they are male.

Women have traditionally paid less for cover because they are assumed to be safer drivers – the statistical evidence certainly backs this up. But a European Court of Justice ruling comes into effect on December 21, 2012 that will outlaw the practice of charging a different price (for any kind of insurance) according to gender.
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We’re closely monitoring how insurers will respond to this change in the law, and we’ll keep you posted.

In the meantime, we will continue to drill deep into our data to see what’s happening to motor insurance prices. The information we unearth will help us continue our fight to drive down your premiums and save you money at every renewal.

Please note: Any rates or deals mentioned in this article were available at the time of writing.

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