Since the turn of the year, car insurance providers have been unable to offer cheap, introductory premiums solely to new customers. That’s because existing customers must now be legally allowed to access the cheapest deals.
While some have lauded the end of the car insurance ‘loyalty penalty’, it appears the rule change has contributed to higher premiums for everyone as insurers try to re-balance their books.
However, if you are a motorist, don’t be too disheartened as there are still ways to cut costs. Here’s what you need to know.
What has happened to car insurance premiums recently?
According to Compare the Market, the average car insurance premium increased by £42 between the first and second week of 2022. The comparison website also suggests that the cheapest premiums shot up by an average of £31 over the same period.
In fact, it appears that car insurance premiums actually started to rise during the last quarter of 2021. MoneySuperMarket, for example, revealed that average car insurance premiums rose by as much as 7% during this period, while Confused.com suggested premiums had risen 5%.
Why are premiums rising?
While the new year rule change banning insurers from excluding existing customers from the cheapest deals is likely to have had an impact on recent car insurance hikes, we know premiums had started to rise at the tail end of last year. As a result, there are clearly other factors at play.
According to the Association of British Insurers, a trade body for the industry, rising costs for repairs and parts are also having an impact on prices.
AIB’s general insurance manager, Laura Hughes, explains: “While we expect the motor insurance market to remain highly competitive in 2022, rising costs for parts, repairs and other supplies and services will continue to put pressure on premiums for motor insurance for both new and existing customers.”
“Insurers appreciate that many households are facing a cost of living squeeze with rising household bills as costs rise in other areas of the economy, and they will be doing all they can to ensure competitively priced motor insurance, in the face of the variety of cost pressures faced.”
How can you cut the cost of your car insurance?
While premiums are heading upwards, you can still cut the cost of car insurance by following these four tips:
1. Consider the type of cover you need
The type of car insurance cover you opt for can have a massive impact on the price of your car insurance quote. Here are the three main types:
- Third party: This is the lowest level of cover. If you’re involved in an accident, this level of cover will pay for damage to the other vehicle but not your own.
- Third party, fire and theft: This is just third party cover, but with the added protection that you’ll be covered if your car is lost, stolen or catches fire.
- Comprehensive: This is the maximum level of cover. It covers you for everything mentioned above, as well as damage to your own vehicle.
While there are three main types of cover, remember that policies can vary massively between providers. Always check the policy wording carefully.
2. Compare prices
While new customers can no longer benefit from exclusive, introductory premiums, there are often savings to be had by comparing prices.
By far the easiest way to compare prices is to use the services of a car insurance comparison website.
Popular choices include MoneySuperMarket, Go Compare and Confused.com. If you can, it’s worth checking more than one comparison service. That’s because some deals may be exclusive to a particular site.
3. Pay for your policy upfront (or use a 0% card)
Your car insurance policy will often be cheaper if you pay for it in one go. In other words, paying for your policy in monthly instalments is likely to be more expensive than paying annually.
If you’re not in a position to cough up the full cost of your premium at once, consider buying your car insurance with a 0% purchase credit card. That way you can still benefit from the annual policy discount while spreading out the cost. Right now, you can borrow at 0% on this type of card for up to two years!
4. Remember your no claims bonus
If you’ve got a few accident-free years under your belt, then you can expect a lower car insurance premium. Always remember to calculate how many years you’re entitled to and include this information when getting a new quote. Do ensure it’s accurate, as you’re often required to provide proof to your new insurer.
Are you looking for more ways to cut the cost of your premium? See our seven simple ways to save money on your car insurance in 2022.
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About the author
Karl is a writer specialising in investing and personal finance content. He regularly contributes articles on savings, bank accounts, mortgages, and loans. He was previously a Personal Finance Writer for MoneySavingExpert.
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