UK car insurance premiums hit a seven-year low at the end of 2021, according to figures from a leading price comparison website. Data from CompareTheMarket.com shows the average premium dropped to £640 during September, October and November last year – the lowest level for those months in seven years.
Not only did that figure represent a seven-year low for the time of year, but it was down more than £80 compared with the same period in 2020. At the same time, the lowest quoted price also fell to £537 – down £68 compared with the same part of 2020.
Although the price has tumbled over the past few years amid coronavirus restrictions, CompareTheMarket.com says the reduction may be down to the new insurance pricing rules that came into force on January 1, 2022. The Financial Conduct Authority’s new regulations prevent insurers from charging existing customers more than the equivalent new customer – a practice known as price walking.
The technique, which sees insurers charge new customers a low amount, only to raise it when they renew, was deemed to penalise loyal customers. Because the potentially lucrative practice is no longer permitted, CompareTheMarket.com suspects insurers may have been trying to lure unsuspecting customers in ahead of the rule change.
"Motorists will be glad that premiums are cheaper than last year but there is a sense of 'buyer beware',” said Ursula Gibbs, the director of CompareTheMarket.com. “It looks like insurers have been keeping premiums lower as part of a clever pricing game to try and lock in as many customers as possible before new regulations are introduced in January.
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“Our figures suggest motorists could lose out if they auto-renew their policy; by switching to the cheapest premium instead, motorists could save around £100 and young drivers could see even bigger savings of almost £300. These savings gained by those drivers switching their provider could also help to offset the current rising cost of living.
"However, there is uncertainty over what will happen to the cost of car insurance in January. While the rule changes should end the loyalty penalty, this does not mean that auto-renewing your insurance will get you the best deal. People should be careful not to fall into any traps as insurers may decide to hike premiums for a large number of customers if they can't charge existing customers more. Though the size of any price increases for motor insurance may be limited if more Omicron travel curbs come into force.”
Source: CompareTheMarket.com