Yahoo Finance Coronavirus: Car insurance premiums at lowest level in 5 years
Average car insurance premiums have dropped to the lowest level for winter in five years, a report from comparethemarket.com has shown.
The average premium in Q4 (September 2020 to November 2020) stood at £707 ($955), declining by £24 from the same quarter last year, making it the most affordable since 2015.
Premiums have remained low during the government’s social distancing restrictions, the report explained, as people have been encouraged to work from home and only make essential journeys, which has taken many cars off the roads. In fact, Department for Transport data shows car traffic has decreased by 21% year-on-year.
This has reduced the number of claims, helping to push premiums down.
“Cheaper premiums this winter are a silver lining for motorists. Drivers will be pleased that premiums are more affordable than in previous years, as household budgets continue to be strained,” said Dan Hutson, head of motor insurance at comparethemarket.com.
However, he noted that as the vaccine roll-out gets underway and the economy starts to recover, premiums may also start to rise as more motorists return to the roads.
READ MORE: Car insurance premiums fall but rate of decline slows
The cheapest premium available in Q4 has also fallen year-on-year. It now stands at £603 compared to £617 in Q4 2019.
But despite being cheaper than in previous years, premiums in Q4 have risen slightly from the preceding three months.
Both the overall average premium and the average cheapest premium have risen by £5 since Q3.
“However, this minor uplift is much lower than the jump in premiums typically seen heading into winter,” the report said. For instance, premiums rose by £23 between Q3 and Q4 last year.
The study also noted that in May, the Financial Conduct Authority encouraged car insurers to look at the risk profile of customers which may have changed significantly because of the coronavirus, and asked motor insurers to waive cancellation fees and other charges associated with changing policy details.
As a result, average premiums have dropped by £48 since the start of the pandemic.
Following the second lockdown, the average premium in November fell by £25 from the previous month to £691 – the cheapest monthly figure since March.
November’s average premium is also £63 lower than the same month in 2019. The cheapest premium available has similarly decreased to £591, down from £610 in October.
While premiums may be cheaper than in previous years, the gap of £104 between the lowest and average premiums in Q4 shows that “shopping around is the best way to save money on car insurance,” the report said.
For those aged under 24, the difference in premiums is nearly double, as a typical young person could save £204 by switching to the cheapest deal.
“In addition, if you plan to spend less time on the road in the coming months, perhaps because you can work from home, your insurer may consider you a lower risk and cut the cost of your premium,” said Hutson.
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