Car insurance costs surge with many drivers hit with loyalty penalty

The cost of car cover has risen to the highest level for a year after drivers saw the biggest jump in average premiums since the pandemic.

Average premiums in the second quarter of the year were up to £554, which is the highest it has been since the beginning of 2021, Confused says.

This is an increase of £32  – or 6 per cent – compared to the same period a year ago – the steepest rise since before the pandemic hit, according to the comparison website.

Car insurance is now £25 more expensive on average than it was at the start of the year in another squeeze on motorists’ budgets during the cost-of-living crunch, Confused says.

The average price of a motor policies at the end of June is the highest since the first quarter of last year, when prices were at £522.

While the £32 rise in the biggest recorded since the pandemic, the price paid for car cover is still well short of the pre-Covid average, which stood at £770 at the end of March 2020.

The comparison site says it is loyal customers who are taking the biggest hit in the last three months, having seen their average renewal prices rise about those taken out by new policy holders. 

A survey of 2,000 UK drivers found that almost half of those who received their renewal in the second quarter of 2022 saw their price increase by £41 – that’s £9 more than the average hike in motor insurance costs. 

This is despite one in 10 drivers who have renewed their car insurance since January 2022 believing that prices wouldn’t increase after the Financial Conduct Authority imposed strict guidelines for transparency around renewals earlier this year. 

However, while prices are increasing for new policies too, the data shows that drivers could still save money by shopping around and taking out a new policy. 

In fact, those who shopped around after receiving a more expensive renewal price saved £54, on average, after using a price comparison website and switching insurers.

With inflation and the cost of living on the rise and fuel prices still at incredibly high levels, drivers are rightfully worried that escalating motor insurance is adding to the wider financial pinch, says Confused.

Louise O’Shea, chief executive, says drivers also need to be aware that the recent FCA changes do not always mean a cheaper or like-for-like renewal price, as any increase to the average UK car insurance costs will be reflected in renewal premiums. 

And it’s likely that prices will continue to increase as motorists spend more time on the road, meaning the likelihood of claims will increase too.

However, with the cost of living crisis worsening and further household bill hikes expected later in the year, drivers need to be savvier than ever.

‘With millions stung by the current cost of living, it can be disheartening to see that car insurance prices are also on the rise,’ O’Shea said. 

‘As the latest data shows, we’re seeing the highest spike in prices since before the pandemic. With us all still adjusting to life after lockdown, it’s likely that this is due to the number of insurance claims being made increasing as we get back into some sort of routine. 

‘Unfortunately, this means that you might notice a price increase when renewing or shopping for your car insurance.’

Car insurance is now £25 more expensive on average than it was at the start of the year in another squeeze on motorists’ budgets during the cost-of-living crunch, Confused.com says. 

Which drivers are seeing premium rise most – and who is paying LESS than they did last quarter?

Confused’s data – which is based on six million insurance quotes provided to motorists each quarter – shows that female drivers have seen their price increase less than men, with prices rising £28 and £34 respectively on average in the last 12 months. 

This means women are now paying £492, on average, while men pay £591 in comparison.

Regionally, year-on-year prices have increased for drivers in all UK areas – though there have been some marginal declines from Q1 to Q2. 

For instance, drivers in the South of England are now paying £6 less than those shopping around last quarter, while prices in the East Midlands fell by £5 in the past three months. Both are declines of 1 per cent compared to the end of March.

However, year-on-year, some drivers have seen their price increase by as much as 12 per cent on average. 

In Northern Ireland, prices have soared by £64 year-on-year to £594, while those in Inner London are paying £74 more than they did in the second quarter of 2021, with average premiums now up to a whopping £882.

It’s a similar picture across age groups, with some motorists paying less now than three months ago. 

In particular, 32-year-olds have seen the biggest decline in prices over the last quarter, and are now paying £21 less – a decline of 3 per cent. This is despite prices increasing by £46 (7 per cent) over the year. Motorists of this age are now paying £692, on average. 

Similarly, 19 and 30-year-olds have seen a drop in prices in three months, with premiums falling by £14 and £12 respectively, on average.

However, drivers in their early-20s have seen a significant jump in prices, with some paying almost £100 more compared to 12 months ago. 

In particular, 21-year-olds are paying £98 more year-on-year, with the average premium now an eye-watering £1,205. 

Meanwhile, 20-year-olds are paying £1,288 following a £92 jump over the 12 months. 

This isn’t the highest price paid: 18-year-olds fork out a staggering £1,453. 

Confused says prices for younger motorists only fall below £1,000 for drivers over the age of 24.