Motor Insurance

Good news for motorists | The cost of car insurance falls Q3 2021

With prices of nearly everything on the rise these days for motorists, one bright spot is that car insurance continues to be more affordable.

Car prices are up. Petrol prices are up. But car insurance prices? Down!

Drop in the cost of car insurance for Q3 2021

The Association for British Insurers has just reported that the average cost paid for car insurance in the UK has dropped 7% compared to the same time last year.

Motorists paid an average of £429 in the third quarter of 2021 (that is, over July through September).

This reflects a drop of £40 per policy this year alone.

Why has car insurance become cheaper?

The primary reason that car insurance is cheaper right now is down to Covid-19. During the lockdowns, fewer cars were on the road. As a result, there were fewer road accidents so insurers paid out less in claims. Since insurers have saved money on claims payouts, they've been able to pass these savings on to motorists in the form of cheaper premiums.

Laura Hughes, ABI’s Manager, General Insurance, said:

“Motorists continue to see the benefits of fewer claims made during the pandemic lockdowns. While next year will see some significant changes in how motor insurance is priced with the introduction of pricing reforms, and continued cost pressures around repair costs, the market will remain competitive, so it will still pay for motorists to shop around for the best deal for their needs.”

Other ways to save on motoring

While the drop in car insurance costs is certainly good news, owning a car is still expensive—NimbleFins research shows it costs on average £3,000 a year to run a car. In fact, transport is most household's biggest budget category. Budget-conscious motorists can keep in mind some of these other ways to save money on car ownership costs, if the drop in insurance costs is not enough of a win for them:

  1. Choose the right type of cover. Sometimes the "best" car insurance (comprehensive cover) can be the cheapest.
  2. Swap for a car in a lower insurance group. Cars in lower insurance groups cost less to repair or replace, making them cheaper to insure.
  3. Compare rates before buying or renewing. Never accept a renewal price without first checking the market. Ideally do so around three weeks ahead of the renewal date.
  4. Install a telematics. Black boxes track a motorist's driving style and report back to the insurer.
  5. Increase the voluntary excess. Just be sure the excess could be paid easily in the event of a claim.
  6. Pay upfront. By paying the entire year's premium upfront, avoid finance charges that are usually charged on monthly payments.
  7. Don't automatically renew. Check the market before renewal in case there's a better deal elsewhere.
  8. Avoid using the car for business. This is because adding business use typically increases the premium.
  9. Build up no claims. Careful drivers without claims can save up to 30% or more on car insurance.
  10. Avoid unnecessary extras. To be sure, add any extras that are needed; just be careful when choosing (e.g. if a motorist already has breakdown cover they should think hard about adding extra breakdown cover through their car insurance).
Erin Yurday

Erin Yurday is the CEO, Co-founder and Editor of NimbleFins. Prior to NimbleFins, she worked as an investment professional and as the finance expert in Stanford University's Graduate School of Business case writing team. Read more on LinkedIn.

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