Car Insurance in UK
The average car insurance premium in the UK for comprehensive cover costs £485 a year, according to Association of British Insurers (ABI) data for the third quarter of 2017. That is the equivalent of £40.41 a month.
ABI says that in the third quarter of 2017, the average price of comprehensive motor insurance rose by 10% on the third quarter of 2016. That’s an increase four times the rate of inflation, or a total average increase of £45.
ABI says that the average premium is the highest it has ever been since it started tracking motor insurance prices in 2012.
The ABI uses data from a number of insurers but other organisations give different answers.
According to Consumer Intelligence car insurance premiums have gone down by 5.5% over the last 12 months to an average of £712 per year.
Car insurance premiums for under 25s have gone down by 11.9% due to a growing number of insurers offering telematics. However younger drivers still pay a lot more compared to people in their 50s – according to CI’s data, drivers under 25 often pay an average of £1,635 a year compared to an average £413 for over 50s.
MoneySuperMarket says the average cost of annual car insurance from March – May 2016 was £470 and Confused.com says it was £827 in the last quarter of 2017.
However, they all agree that costs have risen in the past few years. This is due to a number of factors, but includes the increase in insurance premium tax from 10% to 12%. This happened on 1 June.
MoneySuperMarket says prices soared 22.6% in the past two years and the ABI calculates today’s prices are the highest ever. Previously, the highest average was in the second quarter of 2017, when the average price stood at £479. Confused.com says that prices have increased by 8% in a year on average, equivalent to £60.
Recent research from Comparethemarket.com suggests that the average policy in the third quarter of 2017 was £740. That’s £42 more than the average at the same time in 2016, which was £698, according to comparethemarket.com.
Each company works out its average premium in a different way. This accounts for the discrepancy in figures.
It is possible to pay less than the average premium. Car insurance costs are calculated using three core factors: the car you drive, your driving experience and age, and your claims history.
We’ll look at each of these below.
Factors that affect car insurance premiums
The car you drive
Insurers set a premium based on a driver’s ‘risk’. This is the probability they will need to make a claim.
Insurance firms work out your risk using the information you give them when you get a quote. There are many factors involved in this calculation but a key one is the kind of car you drive.
The make, model, age, security, value and size of your car all affect the price of your insurance.
Some of the factors influence the chance of a claim and others the cost of a claim.
Your driving experience and age
Most young drivers have experienced the pain of trying to get a reasonable insurance quote. Data does show that young drivers are more likely to be involved in accidents; unfortunately, that means insurers tar all young people with the same brush.
Premiums are usually high for people around 17 and 18 years old because they haven’t had the same time as older drivers to prove they are safe behind the wheel.
The more experience you have, the cheaper your car insurance premium. That is why people aged between 40 and 70 with no claims are likely to be able to get the cheapest quotes. After 70 prices tend to rise because people’s reaction times slow with age.
Young drivers do have options to lower their premiums. Insurers will take into account advanced driving courses when calculating a quote and black box policies can bring down premiums even more.
History of claims
Insurers use data on previous claims to calculate your premium.
Customers can also build up a no claims bonus (NCB), which is based on the accumulative years they have not made a claim. Insurers offer discounts relating to a customer’s NCB, which vary from company to company.
The Co-op offers a 70% discount for five years or more without claims.
Unsurprisingly, if a driver makes a claim their insurer is likely to increase their premium because they believe there is a greater chance of them make subsequent claims.
However, it’s difficult to say how much car insurance goes up after a claim. If a driver is not at fault their no claims bonus may be protected.
How the average costs of car insurance are calculated
ABI – Average: £485 a year – The first answer we give is from the Association of British Insurers (ABI), the trade body for insurers that was formed in 1985 and has over 250 member companies, accounting for over 90% of the UK insurance market.
It collects stats on quotes and claims from members and says its data “offers the most comprehensive coverage” of the market.
Its motor statistics cover quarterly and annual premiums, claims, distribution and fraud.
Headline figures such as the average cost of insurance are published on its site for free but you have to pay for more detailed information.
With such a large volume of data, the ABI’s average should offer a good picture of the price of insurance. However, the average is likely to include all types of policies for all age groups so it can be difficult to apply it to individual circumstances.
The index is useful because it breaks down the data by categories such as age, gender and location. For example, its most recent study says an 18-year-old pays £2,272 on average for comprehensive cover and a 66-year-old pays £460. It also says prices have increased £101 on average year on year.