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Car insurance prices, premium drivers index

Every quarter, comparethemarket.com releases research into the latest savings index for car insurance premiums by comparing our ‘cheapest’ and ‘average’ motor premiums across all age groups and determining something we call ‘the savings variable’. The findings can help to give you an idea of how much it would pay to shop around for your car insurance, instead of simply auto-renewing with your current provider. In general, the higher the savings variable is, the more you could stand to save by doing your homework and comparing prices.

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Car Insurance Savings variable

The past two years have proved to be an expensive time for UK drivers. Car insurance premiums have climbed steadily and our latest report suggests that, unfortunately, this trend is likely to continue...

The cost difference between the cheapest and average premiums has increased to £128 – that’s the highest recorded level since we started compiling the Premium Drivers index back in September 2012.

What’s more, the average motor premium rose to £758 in Q4 2017 – up £43 year-on-year. The cheapest policies have also crept up and now stand at £629, compared to £591 this time last year.

The savings variable fell for the fourth consecutive quarter to 17.01%, which is down slightly from 17.27% for the previous three months. And although the savings variable has remained relatively stable over the past year, it’s significantly higher than the initial variable of 15.63% in 2012, suggesting that competition between insurance providers is low and potentially driving up the cost of insurance. And that means there could be significant opportunities to make savings simply by comparing prices when your insurance is due for renewal.

Car insurance prices, premium drivers index

Car insurance prices, premium drivers index

What’s behind the price rises?

According to our research, the cost of car insurance has soared by almost £200 over the past five years. This is due to various factors, not least the multiple increases in Insurance Premium Tax (IPT). Currently standing at 12%, IPT has doubled since 2015, adding to the financial pressure that motorists are currently under.

Changes to the personal injury discount rate (known as the Ogden Rate), which came into force in March, continue to impact on premiums. By November of this year, the average price of car insurance had risen by £50.

What’s more, the cost of car insurance tends to increase towards the end of the year, meaning that December’s average premium could possibly exceed £800.

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Simon McCulloch

Director

comparethemarket.com

“Over the past five years, we've seen non-stop cost pressures on British drivers, who still face ever-increasing premiums. The gap between the average and cheapest premiums is now at record levels, at an average of £129, showing the very real savings that can be made by switching providers.

“The impact of the Ogden rate change announcement in February was immediate, as premiums quickly shot up by £20 on average in March. After insurers then successfully lobbied for a review in September, most expected premiums to fall and stay lower. While there is uncertainty around the new rate, and some insurers may be cautious and planning for higher costs in the future, it is still likely to be a lower discount than what was previously applied. The real impact of the Ogden changes will be easier to analyse later in 2018 but, for now, drivers are still having to face record level motor cover costs.”

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Past reports

We carry out this research every quarter to find out what the current landscape means to you when it comes to buying your car insurance. Here you can see our previous reports to see how the industry has changed over the past year and what this means for your car insurance premium.

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