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Car insurance cheaper as travel bans curb drivers

One positive effect of the Covid-19 pandemic is that car insurance premiums have fallen to their lowest average since 2015.

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Another effect of the Covid-19 pandemic on the motor industry has been revealed in a report showing that annual insurance premiums have fallen to their lowest average since 2015.

There is usually a slight dip in insurance prices at the start of any year but for 2021 it was a completely new story. In the last year, the government’s travel restrictions have resulted in fewer cars on the road, which has led to a 19% decline in car insurance claims.

The insurance firms have passed on some of those savings to motorists through lower premiums. Some insurers, such as Direct Line, Admiral and Esure, have also been giving refunds to customers for miles they thought they were going to do, but weren’t allowed to.

Average premiums plummet

The average car insurance premium fell by £55 in the first quarter (Q1) of 2021, compared with the previous quarter, according to a report from insurance comparison site comparethemarket.com. It’s the steepest fall in premiums over a three-month period since their research began in 2012, and means the average premium in Q1 2021 (December 2020 – February 2021) dropped to £652.

This represents the lowest quarterly average for car insurance premiums since Q3 2015, when a typical premium cost £606. 

Premiums have also declined by an average £103 year-on-year, as the pandemic has caused a sharp drop in the cost of insurance. This also represents the largest 12-month decline on record.

The cheapest premium typically available at the start of 2021 also tumbled by £68 year-on-year to £560. The drop means there are still significant savings available to drivers who shop around for the best deal when their policy comes to an end.

Inexperienced motorists

A drop in the number of inexperienced drivers on the road might also have contributed to the decline in car insurance claims and subsequent fall in premiums. Latest DVLA figures show a 48% drop in the number of people passing their practical driving test in 2020, compared with the previous year, as the pandemic prevented or discouraged L-drivers to hit the road.

Young motorists though, have seen the greatest financial benefit from the fall in premiums. The average cost of car insurance for drivers aged under 25 has dropped to £1,097, down from £1,282 in the same quarter in 2020.

“Motorists will be thrilled that the cost of car insurance has nosedived in the first quarter of this year,” says Dan Hutson, head of motor insurance at comparethemarket.com.

“The drop in insurance claims seems to be trickling through to the cost of premiums. This fall will be particularly good news for young drivers who typically face the highest premiums.”

Keep your insurer updated with your details

Although some car insurance providers have been actively offering customers refunds, it’s important to remember that the vast majority of insurers won’t be so helpful. It’s up to you as the policyholder to make sure that your policy details are all correct and up to date at all times.

There’s no guarantee that lower mileage will translate to significantly lower insurance premiums, as there are many other factors that contribute to your overall premium. For example, if the insurer considers that the greatest risk to your policy is your car being stolen from your driveway, then having it parked there far more often may increase that risk rather than decreasing it.

As part of your annual insurance renewal, you should always shop around. Whether it’s using a comparison site or by calling insurers directly, you will almost certainly get a better price than if you simply accept the renewal quote your insurer sends you each year.

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Tom Johnston
Tom Johnstonhttp://johnstonmedia.com/
Tom Johnston was the first-ever reporter on national motoring magazine Auto Express. He went on to become that magazine’s News Editor and Assistant Editor, and has also been Motoring Correspondent for the Daily Star and contributor to the Daily and Sunday Express. Today, as a freelance writer, content creator and copy editor, Tom works with exciting and interesting websites and magazines on varied projects.