Car insurance prices drop £100 to a six year low – here’s how to lock in the best deal

BRITS have been hit with a raft of price hikes in recent weeks, but there’s good news on the horizon for motorists at least – car insurance costs are falling.

Research by confused.com found the average car insurance premium has fallen by £100 over the past 12 months to a six year low.

Prices are down 16% compared to a year ago – the biggest quarterly drop since 2014, according to the comparison site.

The average premium is now £514 for UK drivers. 

That will be a welcome saving to households who have seen petrol prices climb to an eight-year high and energy bills soar.

The latest car insurance price index found that motorists in Inner London, Manchester and Merseyside have seen the biggest reductions in insurance costs. 

Drivers in the capital could see their premiums plummet by as much as £164 compared to a year ago – but it’s still the most expensive place in the UK to insure a car at an average cost of £804. 

Those in Wales have seen the smallest drop in price at £53, but their premiums are much cheaper at an average of £346.

Even younger drivers, who pay the most for insurance, have seen their premiums fall by 11% over the past year. The average premium is down £176 to a still-expensive £1,379 a year. 

Male drivers have seen a bigger fall in insurance costs, falling £103 to an average of £549. Meanwhile female motorists will see their average premium drop £88 to £456 a year. 

Why is car insurance cheaper? 

The Covid pandemic is a major driver in why the cost of car insurance has fallen. 

Through the lockdowns of the past year, many people were driving far less than usual and that means fewer claims were put through.

The police even reported a 26% decline in the number of road accidents they attended to, according to Confused.com. 

As a result, the outlay for insurers has been lower over the past year and they can reflect that in their prices. 

But people are being urged to lock in a decent deal now as prices could be set to rise in January when new rules come into effect. 

Martin Lewis is among the experts warning drivers to shop around now, even if their policy is not yet up for renewal. 

From the new year, insurers will have to charge the same price to both new and existing customers.

Historically, people who stayed with their insurers year after year without haggling would be paying over the odds compared to those who shopped around. 

New customers were offered much cheaper deals to entice them switch providers. 

But new rules being introduced by the financial regulator will eliminate loyalty penalties. 

While that might seem like a positive, it could end up hitting some people in the pocket.

Martin warned this week: “My guess is firms won't just cut renewals to match newbies' prices. They'll drop 'em somewhat, and increase new-customer rates – meeting towards the middle.

"While the new regime officially starts in January, as it's a big job, insurers will likely start to shift pricing algorithms sooner, so the clock is ticking and the cheapest prices may start to disappear within weeks or months."

He is advising that home and car insurance customers start shopping around now to secure the best deals before they disappear.

You should be able to cancel your insurance even if you're mid-policy and get a pro-rata refund.

How to find the best deal 

With motorists back on the roads and driving more, as well as the new regulation, it’s likely that insurance prices could soon be on the up again.

That means if your current deal is coming to an end, it’s time to shop around. 

And even if it’s not, as long as there’s not a huge exit penalty, it could make sense to get out of your current insurance contract early to take advantage of cheaper prices while you can. 

Louise O’Shea, chief executive at Confused.com, said: “It’s likely that prices could start to creep up as people return to work and people are spending more time travelling on the road, which all means the risk of accidents is a lot higher. 

“We’re already starting to see this in some areas of the UK. And this will mean that the overall price of insurance will increase, and your renewal could too. 

“Unfortunately, we are also seeing a lot of other household bills increase, particularly energy, so it’s more important than ever for consumers to be making savings while they can.”

Comparison sites such as Go Compare, Compare the Market, Uswitch and MoneySupermarket are good places to start.

It's usually worth using more than one, as different comparison sites will have different deals.

Some insurers, most famously Direct Line, don't use these comparison sites so it's worth checking their websites direct for quotes.

Don't just pick the cheapest policy – consider factors like the excess you'll have to pay if you claim and any limits on the insurance.

It’s also worth checking sites like Quidco and TopCashback to see if you can also earn cashback on top.

Other tricks to help you cut costs on car insurance further. For instance, research by Compare The Market found that policies are £319 cheaper if drivers switch three weeks before their renewal date compared with switching the day a policy ends.

Paying annually, getting a black box and adding a named driver are other tactics that can help. We've rounded up the best nine strategies in our guide.

Tweaking your job title is another way to knock hundreds off your bill. This doesn't mean lying – which is a bad idea – but deciding whether to select 'cook' or 'chef' for instance.

Martin Lewis' MoneySavingExpert has built a clever tool to help you do this legitimately and not in a way that it will invalidate your insurance.

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