Cash in on the cover price crash: Car insurance costs at four-year low

Drivers are being quoted cheaper car insurance premiums for the first time in years. 

But motorists could still pay hundreds over the odds if they accept their new price without shopping around, experts warn.

Insurers have long had a reputation for pushing up prices at renewal, with the so-called ‘loyalty penalty’ costing policyholders £1.2billion a year.

Yet premiums are finally coming down after the number of successful claims made by drivers plunged by nearly a fifth last year.

Shop around: Insurers have long had a reputation for pushing up prices at renewal, with the so-called 'loyalty penalty' costing policyholders £1.2billion a year

Shop around: Insurers have long had a reputation for pushing up prices at renewal, with the so-called 'loyalty penalty' costing policyholders £1.2billion a year

Shop around: Insurers have long had a reputation for pushing up prices at renewal, with the so-called ‘loyalty penalty’ costing policyholders £1.2billion a year

With fewer cars on the road in the pandemic it meant insurers paid out almost £530million less than in 2019.

This saw premiums hit a four-year low in 2020, with the average driver paying £465 for a year of cover, according to trade body the Association of British Insurers (ABI).

Yet, with prices expected to fall further in 2021, experts warn drivers not to become complacent just because their current insurer offers a cheaper quote at renewal.

On average, drivers could save £228 by shopping around for cheaper car cover, according to comparison site comparethemarket.com.

Research by rival site moneysupermarket.com found four in ten drivers — 17.1million – let their policies automatically renew last year.

Yet Sam Devo, 20, has cut the cost of his insurance by £1,120. He previously paid around £1,800 to cover his Ford Ka.

However, when his broker A-Plan quoted £1,740 in January for a renewal, Sam tried comparethemarket.com and was quoted £620 for cover with LV=.

Sam, from St Albans, Hertfordshire, says: ‘I was shocked when I saw the quote.

‘It was so expensive last year and this time I’ll be able to save more of my salary because I’ve now got this cheaper deal.’

With fewer cars on the road in the pandemic, insurers paid out almost £47m less than in 2019

With fewer cars on the road in the pandemic, insurers paid out almost £47m less than in 2019

With fewer cars on the road in the pandemic, insurers paid out almost £47m less than in 2019

Amber Matthews, 26, was quoted £472 to renew her insurance with Hastings last month – £17 less than she paid last year.

But after browsing comparison sites, including Confused.com, the recruitment consultant found a £266 deal with Right Choice.

Amber, who lives with partner Rich Mills, 33, in Manchester, says: ‘The saving was a nice surprise, because it has been tight for us financially with Rich not being able to work because he’s a barber.

‘I’m so glad I didn’t just take that first offer because it was cheaper than last year.’

New rules from City watchdog the Financial Conduct Authority (FCA) are expected to ban car and home insurers from hiking renewal prices if a policyholder’s risk hasn’t changed.

Doing fewer miles? Claim money back 

  • Direct Line customers can request 2 per cent of their premium back for every 1,000 miles they don’t drive — up to a maximum of 20 per cent.  Register online when you renew or call 0345 246 2101 (directline.com/mileage-moneyback).
  • Admiral refunded all customers £25 last April, worth £110million in total. You can also save by lowering your annual mileage. But there is a £9.50 fee online or £25 by phone. Call 0333 220 2000 or visit admiral.com/myaccount. Fees are waived for those struggling financially.
  • LV= customers can reduce the mileage on their policy for free (lv.com/car- insurance). You can get a 10 per cent refund if you are in financial difficulty. To manage your policy you can call 0800 085 5663.
  • AXA changes mileage free online (axa.co.uk/car-insurance), or £10 by phone (can be waived). Call 0330 024 1158.

Money Mail has long campaigned for an end to the loyalty penalty, which costs six million customers who stay with the same insurer around £200 each a year. 

Plans including stopping firms charging current customers more than new customers, were announced by the FCA in September.

They are expected to be confirmed between April and the end of June, and insurers will then have four months to implement them.

However, at the ABI’s virtual conference last month, director general Huw Evans said that firms would need longer, adding: ‘Nobody wants this reform to blow up on day one.’ 

Yet Martyn James, from consumer complaints site Resolver, says that the industry had been warned for over a decade.

He says: ‘The suggestion that it will take over a year to charge people fairly and correctly seems deeply unfair and will not go down well with millions of policyholders who have paid the price for loyalty.’

Industry experts also believe last year’s drop in average policy prices could be partly down to the ban on driving lessons during lockdowns.

Tim Kelly, director of the website Motor Claim Guru, says: ‘Fewer learners would have passed last year, so insurers wouldn’t have been selling too many expensive policies to new drivers.’

He also stressed that motorists had become accustomed to soaring premiums, which insurers have often blamed on costly whiplash claims.

In 2018, the government pledged to bring in new laws to tackle the problem, by banning motorists from instructing a lawyer if they were claiming less than £5,000 for an injury in an accident.

However, while the new rules were meant to be in place from April last year, they have been delayed and are now set to be enforced from May 31.

Mr Evans says the ABI supports the FCA’s proposals, adding: ‘It is vital that they are implemented across the market, so that price comparison websites and insurance brokers are subject to the same level of supervision and monitoring by the FCA, and that firms have sufficient implementation time, so that we get this right.’

f.parker@dailymail.co.uk

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