Insurance premiums hit a seven year low at the end of 2021.
The average annual car insurance premium declined by £80 year-on-year in Q4 (September – November), according to the latest Premium Drivers research from comparethemarket.com.
The average premium is now £640, compared to an average of £721 for the same three-month period in 2020. The decline in the insurance prices also means this is the cheapest Q4 average for car insurance since 2014.
The recent cost of car insurance has tumbled from previous years, suggesting insurers have kept the cost of policies low to attract new customers ahead of the introduction of the Financial Conduct Authority pricing regulations in January 2022. These rules prevent insurers from offering discounts exclusively to new customers.
While the regulations are designed to stop existing customers from being penalised for loyalty, insurers may then choose to increase premiums for new and existing customers from January to make up the difference.
Cheapest quoted premiums have also declined to £537 – a £68 drop year-on-year. This fall in the cheapest premiums has driven up savings available to motorists. Drivers can potentially now save £102 by shopping around for the cheapest deal. This also means motorists could pay £183 less for their insurance than the average for the same time last year by switching to the cheapest quoted premium.
Young motorists could benefit from the biggest savings by switching car insurance. The average premium for drivers aged under 25 stands at £1,205 (September – November 21). However, if young drivers shop around for the cheapest deal when their policies come up for renewal, they could typically save £298 by switching.
Recent research from comparethemarket.com shows that insurance prices for all motorists can be £306 cheaper on average by switching 20 days before the end of a policy compared to the day of renewal.
However, drivers should also be aware that while the average car insurance premium is cheaper in Q4 year on year, on a monthly basis, the average car insurance premium has started to increase gradually from £622 in August to £689 in early December.
While this is a typical seasonal trend, the usual subsequent decline in premiums in January may not happen this year if insurers decide to stop discounting due to the new regulations.