If your car insurance is coming up for renewal in the next few months, there is a good chance you’re in for a nice surprise.
Premiums are falling dramatically – by an average of £221 in the past year alone, according to price comparison website Compare The Market.
That’s a drop of more than a fifth in just 12 months.
In fact, they’re falling so quickly that you would pay around £23 less buying insurance this month compared to last. The average annual premium is now £729.
So why, after months of rising premiums, are they suddenly plummeting?
Money Mail investigates what is going on, whether prices will continue to fall – and the tricks all motorists need to know to ensure they get the best deals.
Better deals: Premiums are falling by an average of £221 in the past year alone. That’s a drop of more than a fifth in just 12 months
Why are prices now falling?
Motorists had a gruesome three years after the pandemic, with premiums soaring by a horrendous 82 per cent between May 2021 and June 2024, according to official inflation figures.
Many received quotes considerably higher than this – even though their circumstances had not changed.
Money Mail received scores of letters from readers who were stung with exceptionally high renewal quotes – in some cases as much as two or even three times more than they had paid the year before.
The industry-wide increases to premiums were largely blamed on supply chains being disrupted by worldwide lockdowns, which pushed up the cost of getting spare car parts for repairs.
Cars waiting for parts were left languishing at the garage for weeks on end, forcing insurers to stump up for expensive courtesy cars. The cost of labour and energy also rose during this period, which pushed up repair costs further still.
Naturally, insurers lost no time passing on these extra expenses to customers in the form of higher premiums to protect – and even expand – their profits.
Those cost pressures finally started to cool last year, which is feeding through to lower cover costs now.
Changing driving habits are also bringing down the cost of cover. For example, for young drivers – who typically are more likely to be involved in accidents – the cost of running a car is now so high that it is driving many off the roads.
It cost new drivers an average of £7,100 to get on the road last year – up 19 per cent on 2023 – once the cost of the car, insurance, driving lessons, fuel duty and insurance are all totted up, according to
Go Compare. The cost of car insurance alone for 17- to 19-year-olds hit a peak of £2,167 in May last year, according to price comparison website MoneySuperMarket.
Ian Hughes, chief executive of insurance analysts Consumer Intelligence, says: ‘As younger drivers are statistically more likely to make expensive insurance claims, a fall in their numbers on the road has contributed to a drop in the number of costly claims, which in turn is leading to lower premiums for everyone else.’
He adds that the number of accidents is also falling owing to increasingly draconian speed limits in residential areas.
‘They are also falling thanks to the fact that a growing number of cars are fitted by default with automatic incident detection [AID], which identifies when a car is heading for a collision and puts the brakes on,’ he says.
‘Plus, many people are driving less because they are working flexibly or from home – that too, reduces the number of accidents.’
How cheap is car insurance NOW?
Premiums have fallen by 23 per cent overall, according to Compare The Market, but the size of falls vary wildly across the country.
Londoners are seeing the biggest falls – £370 on average – while those in Wales are seeing the smallest at £62.
Motorists in London typically pay among the highest premiums because of the increased risks of driving and parking in the capital.
Premiums have fallen in most boroughs by around 21 per cent to 29 per cent – not much more than the national average – but in pounds and pence terms the decreases are much higher.
Younger drivers are enjoying a drop of £425 on average, while those aged over 80 are seeing theirs fall by £61 on average.
However, younger drivers still pay more than twice as much as those over 80 – £1,577 versus £627. Drivers aged 65 to 79 pay the lowest premiums – down £58 in a year to £370 on average.
How can you get the best deals?
With prices falling at this rate, it may be tempting to wait as long as possible to renew your premium. You shouldn’t.
As Hughes explains: ‘Fraudsters tend to buy insurance at the last minute with the intention of buying it for damage that has already occurred and then making a claim as soon as the policy kicks in.
‘If you wait until the last minute – even if it’s just because you forgot to do it sooner – you’ll be seen as a higher risk and so charged a higher premium.’
Tom Banks, car insurance spokesman for Go Compare, adds: ‘Our data shows that the cheapest time to buy a new car insurance policy is 26 days before your insurance runs out. Doing this could save you 55 per cent compared to buying on your renewal day.’
Hikes: Increases to premiums were largely blamed on supply chains being disrupted by worldwide lockdowns, which pushed up the cost of getting spare car parts for repairs
Your new policy may be worse
Around 60 per cent of policies are bought through price comparison websites. Inevitably, it is the cheapest policies that appear at the top of the tables which are the most popular.
That means insurers do everything they can just to scrape another pound off their prices wherever and however they can.
Until 2022, insurers could get their products to the top of the tables by offering so-called introductory offers to new customers.
However, the Financial Conduct Authority (FCA) has cracked down on this practice and now requires insurers to offer the same price to new as well as existing customers.
The move by the FCA was designed to put an end to the ‘loyalty premium’, whereby insurers were charging customers who had stayed faithful for years considerably more than new ones – in some cases 30 per cent or 40 per cent more.
It claimed the new rules would save loyal home and motor insurance customers £4.2 billion in premiums over a decade.
However, investigations by Money Mail found that some loyal customers still appeared to be getting a worse deal – following which the regulator forced more than 60 insurance companies and brokers to prove the practice had been fully eliminated.
Insurers need other ways to attract new business. ‘Now, to get to the top of the tables, insurers are increasingly paring back their policies to make them cheaper to offer – and that waters down the level of cover that motorists receive,’ says Hughes.
‘The market was so distorted since 2022 by rocketing premiums overall that it is only in the past
few months that the impact of the FCA regulation can be seen.’
That means that if you are buying car insurance now, you may not be receiving coverage as generous as what you had with your old policy.
For example, most policies used to include cover for a cracked windscreen as standard. Now, many do not and you have to request it as an add-on to your policy.
Another trick that insurers are using to drive down quotes is paring back policies to an absolute minimum – and then encouraging customers to buy the elements of cover that they have removed as so-called add-ons.
Once you have clicked through from the price comparison website to the insurer’s own to complete the transaction, they do their best to upsell you add-ons, which bring the price back up again.
These include, for example, roadside breakdown cover and a temporary replacement vehicle if your own car is off the road.
Some drivers may find that they may end up paying more for a cheap policy (on to which they bolt lots of add-ons) than if they bought a more expensive policy with better cover as standard.
Once you have included all of your add-ons and have a final price, make sure you go back to a comparison website and see if you still have the best deal available – or if a more expensive one with fewer add-ons required is cheaper.
Sometimes, basic cover can end up being the most expensive, according to Go Compare. It found that the average cost of third-party-only insurance is £591, while comprehensive insurance cost an average of £437.
Tom Banks says: ‘Traditionally, third party-only policies are purchased by higher-risk drivers who may be opting for minimal coverage owing to a history of claims, which then drives up the overall cost of this type of insurance.
That makes it more expensive than a comprehensive policy, despite offering less coverage. This highlights the importance of comparing all insurance options available to you as a driver.’
Hughes recommends that, before you take out a new policy, you should compare the level of cover to the one you are replacing.
If you are not happy with the drop in cover, you may be better off phoning up your existing insurer and haggling down the cost of renewal, rather than taking out a new policy altogether.
New drivers: It cost new drivers an average of £7,100 to get on the road last year – up 19% on 2023 – once the cost of the car, insurance, lessons, fuel duty and insurance are all totted up
Rethink which car you buy
Prices are not falling consistently across the board – they vary dramatically by age group and region, for example.
But there are some variables that you can control. For example, the average premium for automatic cars is £217 higher now than for manuals. If you are considering changing cars, investigate quotes before you go ahead to see how much it could cost.
The cheapest cars to insure last year included the Citroen C1, Fiat Panda, Ford Ka+, Hyundai i10 Premium and Kia Rio, according to Compare The Market.
Try a multi-vehicle offer
Some insurers offer a discount if you take out cover for more than one vehicle.
Hughes advises that it’s no guarantee you’ll get the cheapest price this way, but some multi-car deals are now getting very competitive.
‘If your household has more than one car, check how much it would cost to put them on the same policy before opting for separate ones when you renew,’ he says. ‘You may be surprised.’
Change your job description
When taking out cover, you will be asked for your profession. The wording you use can dramatically change the quote you receive.
Banks says: ‘It is a good idea to think about how you describe your job. Make sure you are still describing your role accurately, but if there are multiple titles you can use to describe your profession it could save you some money. Try changing “chef” to “cook” or “teacher” to “educator”.’
Make sure you shop around
If you receive a renewal quote that is below your current one, it may be tempting just to say thanks very much and lock it in.
After years of price hikes, it may feel too good to be true and worth banking immediately.
However, competition is rising among insurers vying for new business, so there is a good chance you could get an even better deal by shopping around.
If you have locked into a deal and now wonder if you made the right decision, you should have a cooling-off period of around 14 days in which to change your mind.
Make sure you are not left without cover in between cancelling and buying a new one, and check the terms and conditions of your policy.
If you wish to cancel after that, you may be able to if you have not made any claims, but you will usually have to pay an admin fee.
It may be easier and cheaper to wait until your policy is next due for renewal. Experts suggest prices may continue to cool.
The causes of the big price hikes of recent years have abated. So you may find prices have fallen even further when the time to buy a new policy comes around again.
rachel.rickard@dailymail.co.uk
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