Car insurance premiums have risen by at least 11%, or £48, over the past year to an average of £484, according to figures from the Association of British Insurers. If you look at other policy price trackers, the increases are even higher; the AA British Insurance Premium Index shows premiums up by nearly 20% compared with 2016 and at the highest level for 23 years.
The price rise has been driven by a number of factors, including the doubling of Insurance Premium Tax from 6% to 12% in the past year. However, the main culprit is a change in the Government’s discount rate that applies to personal injury payments. For many years, the rate was set at 2.5%, but in March 2017, it was reduced to -0.75%, which has significantly increased the value of compensation payments. There has also been an increase in whiplash injury claims, encouraged by cold-calling law firms.
The good news is that more of us are shopping around for car insurance, encouraged by changes introduced by the Financial Conduct Authority in April 2017. These aimed to boost consumer engagement at policy renewal time and included a requirement to show the previous year’s premium on renewal notices.
So, if you’ve just got the dreaded renewal notice and your premium next year is looking more like a Premier League footballer’s pay cheque than the fee to insure a Volkswagen Golf, here are some steps you can take to get good cover for less (with all quotes provided by Admiral Insurance).
Top 10 tips to cut the cost of insurance
1. Get your job right
Choose your occupation carefully. Cover for a 2006 Audi A3 Sportback 2.0 TDI quattro is £666 for a 40-year-old male teacher living in Kent. However, it is £689 if he is specified as a dance teacher and £699 if he is a deputy head.
The biggest difference we found for two similar jobs was between a national newspaper journalist and an editor with the national press. The former attracts an annual premium of £718 and the latter £644 – a saving of £74.
2. Shop around
Around 7.3 million UK drivers simply stay with their current insurance provider when their policy comes up for renewal – even though 90% of them know they'll probably get a better deal elsewhere. Customer loyalty has little or no value with motor insurance, so rather than simply accepting a renewal quote, you need to minimise your costs by shopping around for the best possible deal. Compare up to 100 car insurance brands with our new partner, GoCompare.
3. Limit the miles
The fewer miles you cover each year, the lower the statistical likelihood of you being involved in an accident – and insurers take this into account. We dropped the mileage on our quote from 10,000 miles a year to 6000 miles and the price dropped by £63 to £581. Don’t be tempted to lie, though, because if you exceed the agreed amount, you might have to pay an extra fee or it could invalidate your policy.
4. Raise the excess
We saved £18 by raising the excess from £250 to £350. However, before committing to a larger voluntary excess, check the cost of any mandatory excess fees. If you’re a younger or less experienced driver, this could be several hundred pounds, meaning the total excess could end up being more than £700.
5. Keep it clean
Motoring transgressions that put penalty points on your licence will also put pounds on your premium. Taking a speed awareness course (if it’s offered) will suspend any points that would otherwise be put on your licence. We added the three points applicable to an SP30 (speeding on a public road) offence to our insured man’s policy and the cost went up by £153, so he would save £53 by taking a £100 awareness course instead of the penalty points.
6. Improve your skills
Saving: up to 35%
Taking a course, such as the IAM RoadSmart Advanced Driver Course, could cut your premium by up to 35%. This particular course costs £149, but you could get your money back in the first year due to the lower premium. With 95% of car accidents caused by driver error, your enhanced skills would also make you 66% less likely to be involved in one.
7. Add a driver
We added a 50-year-old female to our 40-year-old teacher’s policy and the price plummeted from £633 to £408 – a saving of £225, which also reflects the fact that insurers view single people as a higher risk than those living with a partner. It's important to note that, if they are not the primary user of the car and not the registered keeper, they cannot be the main driver. Doing that is known as ‘fronting’; it is illegal and will invalidate your insurance policy.
8. Pay up front
Pay up front instead of spreading the cost of cover over a year and you’ll avoid interest that could be as high as 24%. The Admiral policy for our A3 driver costs £58 more if you pay monthly, due to an APR of 18%.
9. Get a dash cam
Investing in a dash cam could help lower your insurance, especially if you’re a high-risk driver. If we change our 40-year-old driver to a 20-year-old one in the policy (with other details, such as occupation, remaining the same) and add a dash cam, it brings his premium down to £1559. However, the saving of £93 for the year is probably less than the cost of a good-quality dash cam, so actual savings wouldn’t kick in until the second year of cover.
Read our guide to find out which are the best dash cams for less than £150
10. Fit a black box
A growing number of insurers are offering telematics policies, which use a ‘black box’ fitted into the car to monitor your driving and reward you for good habits. This type of cover can be especially beneficial to young drivers who could otherwise be priced out of standard insurance.
For a 20-year-old driver, Admiral’s LittleBox policy has an annual premium of £1652; that’s £525 cheaper than a standard Admiral policy, which works out at £2177.
Do check out the extra fees applicable before opting for a black box policy because they could soon erode the saving you’re making by taking it out.
Click through to the next page for part 2 of our complete car insurance guide
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