The latest figures from the AA British Insurance Premium Index show that average car insurance premiums in the UK have hit a new high and are continuing to rise. So how can you keep your car insurance costs low?
If you thought that the New Year would offer a financial reprieve after months of turmoil that saw energy, mortgage and food bills rise then think again. Even though petrol prices have tumbled from their 2008 highs, motorists have been dealt a blow with the news that car insurance premiums have hit a new high.
Figures show that car insurance premiums took a sharp upward turn during the final quarter of 2008 with the AA British Insurance Premium Index reporting that they rose by an average of nearly one per cent every month. The Index, which has been tracking premiums on both car and home insurance since 1994, is considered the industry benchmark.
There is no reprieve for drivers looking to downgrade their cover in order to find cheaper premiums. The research finds that premiums for third party, fire and theft car insurance, which is typically bought by young drivers, have risen by an average of 3.4 per cent during the same time period and now average £931.31. This average premium is now significantly ahead of that for comprehensive car insurance despite the reduced level of cover, reflecting the lack of experience of the motorists that typically take out these policies. If the same drivers took out comprehensive cover, their premiums would be much higher.
For comprehensive car insurance, average premiums rose by 2.4 per cent over the same period and now have typical costs of £741.66.
What has caused car insurance premiums to rise?
There are several reasons why car insurance premiums have risen - and why the upward trend is only likely to continue.
Despite the fact that the Bank of England base rate has fallen to 1.5 per cent, motorists have been stung because the costs that car insurers face are rising. There has been an increase in the number of personal injury claims and legal expenses - costing the industry around £6.16bn last year and expected to rise to £10.9bn by 2012. Indeed the Index estimates that whiplash claims alone are adding around £66 to a typical car insurance policy premium.
The industry has also been hit by the lack of capital available with some insurers looking to reduce the amounts they tie up in their business to cope with the current economic climate. Experts now predict that premiums could rise by 10 to 12 per cent during the course of 2009.
How can you keep car insurance premiums down?
While the industry as a whole may suffer from rising premiums there is no reason for individual motorists to rest on their laurels and accepting increasing quotes.
According to the Index, the average shop-around premiums for comprehensive car insurance and third party, fire and theft insurance are £550.54 and £618.91 respectively - slashing nearly £200 off the average comprehensive quote and more than £300 off the average third party, fire and theft quote. Clearly therefore the message to consumers is not to accept renewal quotes from their existing car insurance provider and instead to take an overview of the market to see if they can find a better deal elsewhere.
This can be done comparatively quickly by using a car insurance comparison website of which there are a large number based in the UK. Users simply enter their details and the websites search for quotes from all the providers in their listings in some cases as many as 90 different insurers returning the cheapest quote at the top of its table based on your circumstances. Generally the cheapest car insurance quotes are found online because providers save money by doing business on the internet with reduced overheads. They also offer their best deals to new customers and generally offer sizable discounts.
Of course if you’re in the middle of a car insurance contract and your premium isn’t up for renewal any time soon, shopping around at this stage may not be an option because it would cost you a high penalty fee to break your existing contract. If that’s the case then contact your existing insurer and ask for guidance on bringing your premiums down.
Insurers will generally reward you if you take steps to reduce your risk level. For example, if you fit approved security devices such as alarms, immobilisers and trackers you will cut your risk of car theft and this could earn you premium discounts upwards of 10 per cent. Insurers may also offer rewards if you park your car in a garage overnight, reduce your mileage limit, pay your premiums annually instead of monthly and take an advanced driving course.
Note down your policy renewal date however - then when the time to renew is close compare car insurance online to see if you can find a cheaper deal elsewhere.
Figures show that car insurance premiums took a sharp upward turn during the final quarter of 2008 with the AA British Insurance Premium Index reporting that they rose by an average of nearly one per cent every month. The Index, which has been tracking premiums on both car and home insurance since 1994, is considered the industry benchmark.
There is no reprieve for drivers looking to downgrade their cover in order to find cheaper premiums. The research finds that premiums for third party, fire and theft car insurance, which is typically bought by young drivers, have risen by an average of 3.4 per cent during the same time period and now average £931.31. This average premium is now significantly ahead of that for comprehensive car insurance despite the reduced level of cover, reflecting the lack of experience of the motorists that typically take out these policies. If the same drivers took out comprehensive cover, their premiums would be much higher.
For comprehensive car insurance, average premiums rose by 2.4 per cent over the same period and now have typical costs of £741.66.
What has caused car insurance premiums to rise?
There are several reasons why car insurance premiums have risen - and why the upward trend is only likely to continue.
Despite the fact that the Bank of England base rate has fallen to 1.5 per cent, motorists have been stung because the costs that car insurers face are rising. There has been an increase in the number of personal injury claims and legal expenses - costing the industry around £6.16bn last year and expected to rise to £10.9bn by 2012. Indeed the Index estimates that whiplash claims alone are adding around £66 to a typical car insurance policy premium.
The industry has also been hit by the lack of capital available with some insurers looking to reduce the amounts they tie up in their business to cope with the current economic climate. Experts now predict that premiums could rise by 10 to 12 per cent during the course of 2009.
How can you keep car insurance premiums down?
While the industry as a whole may suffer from rising premiums there is no reason for individual motorists to rest on their laurels and accepting increasing quotes.
According to the Index, the average shop-around premiums for comprehensive car insurance and third party, fire and theft insurance are £550.54 and £618.91 respectively - slashing nearly £200 off the average comprehensive quote and more than £300 off the average third party, fire and theft quote. Clearly therefore the message to consumers is not to accept renewal quotes from their existing car insurance provider and instead to take an overview of the market to see if they can find a better deal elsewhere.
This can be done comparatively quickly by using a car insurance comparison website of which there are a large number based in the UK. Users simply enter their details and the websites search for quotes from all the providers in their listings in some cases as many as 90 different insurers returning the cheapest quote at the top of its table based on your circumstances. Generally the cheapest car insurance quotes are found online because providers save money by doing business on the internet with reduced overheads. They also offer their best deals to new customers and generally offer sizable discounts.
Of course if you’re in the middle of a car insurance contract and your premium isn’t up for renewal any time soon, shopping around at this stage may not be an option because it would cost you a high penalty fee to break your existing contract. If that’s the case then contact your existing insurer and ask for guidance on bringing your premiums down.
Insurers will generally reward you if you take steps to reduce your risk level. For example, if you fit approved security devices such as alarms, immobilisers and trackers you will cut your risk of car theft and this could earn you premium discounts upwards of 10 per cent. Insurers may also offer rewards if you park your car in a garage overnight, reduce your mileage limit, pay your premiums annually instead of monthly and take an advanced driving course.
Note down your policy renewal date however - then when the time to renew is close compare car insurance online to see if you can find a cheaper deal elsewhere.
By Alex Gregory
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