Motorists feeling the heat as insurance costs set to rise this summer
Motorists will be feeling the heat as competition amongst motor insurance providers looks set to buck the seasonal trend by decreasing premium prices rather than rising this summer, according to the latest findings from comparethemarket.com’s motor insurance index, Premium Drivers.
The period between May and August has historically been the most competitive time to renew motor insurance, as premiums peak in December, before tailing-off and reaching their lowest point in the summer months. However, the results from this quarter suggest a changing market and that the motor insurance market is seeing lower levels of competition and higher premiums than might have been expected.
The percentage difference between the cheapest and average premiums available on the market – the savings variable – hit 17.1% in May, outstripping the figure of 16.5% seen in December 2015, and marking the greatest gap since December 2013, nearly two and half years ago.
In previous years, comparethemarket.com‘s research has shown a decline between the cheapest and average premiums after the peak price month of December, suggesting that competition increases into the summer. However, the savings variable in March, April and May this year was consistently higher than December’s figure – a pattern not previously seen in the Premium Drivers index.
Motor insurers may be starting to feel the effect of the Chancellor’s announcement in his last Budget that Insurance Premium Tax (IPT) would rise to 10% from 1 October this year, having already been increased from 6% to 9.5% in November 2015. The fact that prices are continuing to rise as we move further through the year indicates a hardening market and the possibility of higher premiums in the future.
The difference between cheapest and average prices between March and May 2016 reached £114, a jump of nearly 4% on the previous quarter and the greatest cost difference ever recorded by the index. Over the past twelve months the average premium across all age groups has jumped more than £100 from £594 in May 2015 to £698 last month. On a quarterly basis, the average premium between March and May 2016 stood at £679, while the cheapest premium reached £564. The difference between the average and cheapest premiums has risen every quarter since March –May 2014 when the price difference stood at £87.
Simon McCulloch, Director at comparethemarket.com said: “Historically drivers who buy their car insurance in the summer months usually see the lowest premiums. However, the reality is that, by renewing your car insurance you are effectively paying a higher amount of well over £100, or over £300 if you are a young driver. This is especially true for those insuring their car in the summer and is a cost which few motorists would wish – or can afford – to bear. Many customers roll over their policy each year even though there are significant savings to be made by shopping around. Ultimately, to get a better deal, consumers could shop around for lower prices and switch provider.”