Drivers in the UK will see their average car insurance costs jump up by at least £30 as insurers aim to boost profits, according to a new report.
Figures from accountancy firm Ernst and Young claims that premiums for the average driver will accelerate by eight per cent next year, the biggest hike of its kind for five years.
While the average motorist could see a rise of £30, it’s thought that younger drivers and motorists deemed to be more at risk could find their costs spiking by £40 or more, while some already pay four-figure sums.
According to the report, insurers have been struggling to cover the rising costs of claims and as a result have to pass these costs back to consumers.
Tony Sault, director of insurance at Ernst and Young, said: “This is the biggest rise in premiums since 2011. Insurers are a long way from achieving a repeat of 2013, when the industry turned a profit for the first time in 20 years, so a further hike in premiums comes as no surprise.
“By passing some of the costs on to the consumer, the industry may be able to reduce the amount of reserves they have to release compared to previous years, but even an eight per cent rise in premiums will fall short of securing profitability.”
Experts have warned that price hikes could leave many struggling to cover the cost of driving, with the hike in premiums another blow to motorists already hit by a rise in insurance premium tax this year.
Back in October, research from Confused.com claimed that motorists are already paying £47 on average more for insurance than they did last year for the same car cover. As a result, the average comprehensive car insurance premium rose by £29 to £629 from July to September, with elderly drivers forced to foot the bill for the biggest overall increases.
Car Keys' top ten tips to cut the cost of your car insurance:
Wondering how to make sure that your insurance premium doesn't end up going through the roof? Here's our top tips on how to best manage the costs of your car.
1. Choose your vehicle carefully
One of the biggest factors in the cost of your insurance is which type of car you drive. In general, cars which are faster, more powerful or more expensive than average will result in much higher insurance costs.
However, be aware that power isn’t everything. Cars which are costly to repair or replace than others will command a higher premium, as will cars which are seen as high risk because they’re frequently involved in claims.
To keep your insurance to a minimum, make sure that you choose a suitably sized car with a sensible amount of power, with good safety features that's inexpensive to repair.
2. Keep it secure
Insurers will often give you a much more affordable premium if you can do your best to keep the car out of harm’s way. Cars which are stored in secure garages or driveways overnight, or which are monitored by security alarms or cameras are typically less expensive to insure.
However, make sure that you’re always honest about whether or not your car is as secure as you say it is. Dishonesty is not only against the law, but will cause your insurance premium to be much more costly in future and could also render a claim void.
3. Use your car sparingly
Just like finance payments, insurance premiums are usually more affordable for drivers who travel shorter distances. The more often you drive, the more likely you are to have an accident.
To get a clearer picture of just how far you usually travel, you can either check your MOT certificates, which will show mileage from previous years, or track your weekly usage and use it to estimate your annual mileage.
4. Make sure you get the right cover
Most insurers will offer three levels of cover: third party; third party, fire and theft; and comprehensive. Legally, third party is the minimum level of cover required to drive in the UK, but surprisingly it’s not always the cheapest.
Instead, providers are generally more often able to give you their best deals on comprehensive cover, so make sure that you do your research into which is best for you.
5. Consider using a black box
Telematics insurance policies can save you a significant amount on your insurance, particularly if you’re a younger or more inexperienced motorist.
Your insurer will install a small black box device in your car, which monitors your driving habits to build up an accurate picture of your behaviour behind the wheel. Drivers who drive faster, take sharper turns and act recklessly will get higher costs, but improving your behaviour will adjust your premium for the better.
6. Increase your voluntary excess
Insurers base their premiums – the amount they charge you – on how likely they are to pay out in the event of a claim. The more likely you are to make a claim, the more they will charge.
By opting to pay a higher voluntary excess, you will lower the cost to the insurer by essentially promising to pay a larger part of the claim yourself. However, make sure you only choose an excess you can afford to pay and ensure that it’s no higher than the value of your car.
7. Add a named driver to your policy
Particularly if you’re under the age of 25, or if you have previous claims or convictions, insurers will group you in a higher-risk category, which will result in a higher premium.
However, if a responsible and more experienced driver is likely to use the car, adding them to your policy could in fact reduce the cost of your quote.
8. Keep your no-claims bonus protected
At its best, a no-claims bonus can save you as much as 80 per cent of your insurance cost. Although there’s no way to speed up the process, you can improve your chances of getting cheaper insurance in future by protecting your no-claims bonus.
Although your insurer will charge you a small fee, and your current insurance cost will increase slightly as a result, you could end up seeing bigger savings in the long run.
9. Pay it all off upfront
Although it might be tempting to split your insurance costs into monthly payments, paying for it all in one go can actually make more financial sense.
Despite it being a big hit to your bank balance, paying it at once will save you a considerable amount each year. In effect, paying via monthly instalments means you’re essentially taking a loan from the insurer, with interest rates added as a result.
If you can afford to pay the annual cost off in one chunk, you could find yourself saving as much as 20 per cent on your premium overall.
10. Shop around for better deals
When the time comes for you to renew your insurance, be sure to shop around for more than one quote. As it turns out, even if your current insurer was the cheapest option last year, it mightn’t be the same now.
You can use either price comparison sites or contact insurance brokers directly on your hunt for a bargain, but give that comparison sites charge a small commission fee, you can often find it cheaper to go directly to insurers.
