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Energy and insurance bills fell in 2021 but a large increase is expected in 2022

Energy and insurance bills fell marginally in 2021 with annual costs falling £37 during the year, new research has revealed.

A typical household spent £1,968 on energy, home and car insurance over the past year – falling from £2,005 in 2020 and £2,069 in 2019, according to data from Compare the Market.

It analysed the cost of the three services, based on its switching data, and found that household bills were cheaper last year than the two years prior.

However, a sharp increase in the cost of household bills is expected in 2022 with the energy price cap expected to rise by hundreds of pounds due to the ongoing crisis as well as insurance premiums being increased by insurers following changes introduced to tackle the loyalty penalty.

Lower costs: Energy and insurance bills fell marginally in 2021, with annual costs falling by £37 during the past year

With a current rise in inflation and cost of living, this potential hike in household bills could tip many families into significant financial difficulty this year. 

Ursula Gibbs, director at Compare the Market, said: ‘Overall, bills fell for the average household last year, but this comes in the face of rising costs towards the end of the year.

‘The outlook for 2022 is not as positive but our data suggests there are still savings to be made for those who shop around for certain products. 

She adds: ‘Instead of wasting £130 paying more than they need on car and home insurance, people could use that money on something more enjoyable.

‘The money saved on those bills could be put towards many things which have been harder to do in the last couple of years, such as taking a holiday or booking experiences with friends and family.’

The average household energy bill was found to be £1,149 in 2021, up from £1,109 in 2020 – an increase of £40 year-on-year.

This is likely due to the ongoing energy crisis in which wholesale prices have increased significantly. 

As a result, many energy suppliers have collapsed and those that are still running have been forced to up their costs dramatically to survive.  

This will also likely cause the energy price cap to be raised by hundreds of pounds in April 2022.

However, the decrease in household bills was driven by a drop in car insurance costs, as 2021 saw motor premiums fall by £80. The average cost of motor insurance across 2021 stood at £644.

The drop in prices is likely due to fewer cars on the road as many people worked from home due to the pandemic.  

Insurers could also have spent 2021 keeping the cost of policies low to attract new customers ahead of the introduction of the Financial Conduct Authority pricing regulations in January 2022.

HOW MUCH EACH REGION PAYS ON AVERAGE FOR EACH BILL 
Region Name Energy Home Car Total
East Anglia £1,149 £192 £595 £1,936
East Midlands £1,149 £165 £607 £1,923
Greater London £1,149 £236 £977 £2,364
Northern Ireland £1,149 £231 £589 £1,924
North East £1,149 £139 £729 £2,018
North West £1,149 £163 £647 £1,959
Scotland £1,149 £172 £499 £1,820
South East £1,149 £194 £567 £1,911
South West £1,149 £166 £479 £1,795
Wales £1,149 £165 £524 £1,840
West Midlands £1,149 £159 £721 £2,030
Yorkshire and the Humber £1,149 £167 £692 £2,008
Average £1,149 £175 £644 £1,968
Source: Compare the Market       

While the regulations are designed to stop existing customers from being penalised for loyalty, insurers have already begun to increase premiums for new customers.

Costs may also rise as more people continue to commute again meaning there are more cars on the road leading to a higher risk of accidents and increased claims.  

The cost of home insurance also increased marginally to £175 in 2021 and premiums have been steadily increasing over the last three years.

Regionally, homes in Greater London are unsurprisingly found to be paying the most on their household bills at an average of £2,364. 

This is closely followed by the West Midlands and the North East at £2,030 and £2,018, respectively. 

Meanwhile, households in the South West were found to pay the least at an average of £1,795. 

How to save on your bills 

Energy prices remain high with very little options on the market. Customers are now recommended to stick on a standard default tariff as it is capped by Ofgem. 

Currently, the level stands at £1,277 but this is likely to increase by hundreds in April.  

However, switching to the cheapest deals on the market for motor and home insurance could save households a significant £130 per year. 

This includes a £103 saving on motor insurance and £27 saving on home insurance.

Using price comparison sites can help you finder a cheaper alternative at another provider. 

It can also help consumers negotiate with their current supplier to lower their current deal.  

Customers at Compare the Market can set up an automatic energy savings alert which provides regular alerts when cheaper energy tariffs become available to them, as well as sending notifications when a household’s fixed deal is about to expire.

Use This is Money’s car insurance comparison service with Compare the Market to start saving now. 

To find other ways to save on your insurance, click here for ten top tips on cutting down your premiums.  

HOW MUCH ENERGY AND INSURANCE PRICES HAVE CHANGED 
Year Energy Home insurance Car insurance Total
2019 £1,170 £165 £734 £2,069
2020 £1,109 £172 £724 £2,005
2021 £1,149 £175 £644 £1,968
Source: Compare the Market     

Gibbs added: ‘Households are teetering on the brink of considerable increases to their household bills particularly from their energy providers.

‘It is estimated that the energy price cap is likely to rise by hundreds of pounds in April for many consumers, especially as inflation creeps up and the cost of living continues to climb. However, there are ways to help keep your finances in check.

‘Switching provider on household bills could save you money and we would encourage anyone worried about higher energy costs to set up savings alerts so that they can benefit if cheaper deals become available to them.

‘As ever, it’s worth shopping around to see if significant savings can be made through switching provider.’

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