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Average car insurance premiums hit four-year high

Cost of cover rises by £66 over 12 months

price rise

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Car insurance quotes have reached their most expensive point in four years, according to the latest British Insurance Premium Index from the AA.

The index measures an average of the five cheapest premiums for risks representative of the insurance-buying public to determine a ‘shoparound’ price.

Average premiums for comprehensive cover rose by £66, or 11.7% over the year, five times faster than the rate of growth of train fares.

The average quote for a comprehensive car insurance premium is now £633.06. However, this figure will vary significantly by age, car, location and many other factors insurers take into account when calculating premiums.

Third party, fire and theft premiums have risen even further, growing 19.4% throughout 2016 to an average of £940.56.

What’s causing the rise?

Several factors are contributing to the rise in insurance premiums, not least the increase in Insurance Premium Tax (IPT).

Insurance Premium Tax is charged as a percentage of each insurance premium, meaning those with the highest premiums pay more IPT.

The rate of IPT has risen steeply in recent years, starting with an increase from 6% to 9.5% in 2015. In October 2016 IPT was increased to 10%. It’s due to increase again to 12% in June this year, which is expected to push insurance premiums even higher.

Fraud is also having an effect on prices, particularly whiplash claims. Despite the number of traffic collisions falling by 39% in the past 15 years, the number of injury claims has risen by 90% in this time.

Detected insurance fraud costs the insurance industry £1.3bn per year, and false or exaggerated claims are estimated to add £50 to every car insurance policy.

Who’s losing out?

Drivers aged between 50 and 59 saw the largest increases in the last 12 months at 9.7%. However, at £452.54, they still enjoy the second-lowest premiums (after drivers in their 60s, who pay an average of £380.26 for cover).

Young drivers’ premiums have increased by 5.74% in 12 months, costing them an average of £1,435 for comprehensive cover.

Since the EU gender directive in 2012, insurers are no longer allowed to base premiums on gender. However, young men can expect to pay just over £365 more than young women – which could be down to other rating factors such as the car they drive, their jobs and claims history.

How can you save?

One of the best ways to cut the cost of your car insurance is to shop around for a better deal. Get started by comparing now with uSwitch.

Compare car insurance quotes

Compare car insurance quotes with uSwitch today