New figures suggest UK car insurance premiums were up by £43 year on year during the first week of 2022 after new rules were introduced to make pricing fairer. Data from price comparison site CompareTheMarket.com found the average cost of comprehensive insurance in the first week of January hit £680.
That’s a £43 hike compared with the same period in 2021, when the average year’s insurance came in at £636. It’s a result that stands in stark contrast to the price reductions seen over 2020 and 2021, when insurers cut prices as coronavirus restrictions caused traffic levels and accident rates to fall.
The news also comes just days after the Financial Conduct Authority (FCA) introduced a shake-up of insurance rules on January 1. Designed to make pricing fairer, the rules mean insurance companies can no longer offer new customers a lower price than they would quote for the equivalent existing customer.
While the move is intended to prevent a ‘loyalty tax’ on customers who stick with the same insurance company, it could also lead insurance companies to charge new customers more for their premium. As a result, CompareTheMarket.com says it expects prices to rise further as 2022 continues, predicting that insurance firms will steadily raise quotes for new customers to meet the new rules.
Of course, the increases will not yet impact those who are still partway through a year-long insurance policy, but it is an issue for drivers who are about to renew. It’s also a concern for those renewing in the summer, when there should, theoretically, be less incentive to switch insurance company. However, for those about to renew, CompareTheMarket.com says there’s a “brief window” of opportunity for motorists to get insurance at “last year’s prices”.
"The FCA changes are good news for loyal customers who have endured years of rising prices, but people still need to make sure they are being savvy when it comes to their insurance costs,” said Ursula Gibbs, the director of CompareTheMarket.com. “Motor insurance costs are already up over £40 year on year and it’s only the second week of January. The main worry is that the level of savings which are currently available to people who are looking to switch insurance provider imminently could reduce significantly in the coming weeks.
“Motorists need to be quick if they want to make the most of current low prices for their car insurance. Our insight shows some insurers have already hiked prices across the board as they can no longer charge existing customers more money than new customers. Not all insurers have made the change immediately, but it is likely that prices could rise across all providers as insurers adapt to the new regulation. This means there is a brief window for drivers to get this year's car insurance at last year's prices."