Car insurance costs fall at fastest rate in 20 years, but it can’t last

18th August 2014


Car insurance premiums have witnessed their biggest drop in 20 years but there are concerns the cheap prices are unsustainable.


The latest AA British insurance premium index shows the average cost of insuring a car fell in the three months to 30 June by 6.1%, or around £30, to £504.29 – the largest three month fall ever recorded in the index’s 20-year history. Over the past year the average cost of insuring a vehicle has fallen 19.3%, or £120.


Janet Connor, managing director of AA Insruance, said this trend will reverse as the cost of car insurance is becoming unsustainable for the insurers.


‘There are already signs that some insurers are looking to put their prices up and I believe that this time next year, the AA’s index will be reflecting a rising trend,’ she said. ‘But I don’t expect to see the sharp premium inflation we saw between 2009 and 2011, when over a 12 month period premiums rose by more than 40%.’


Although the trend for car insurance costs has been downwards, there is a large variation in the cost of insuring a vehicle depending on where you live.


Unsurprisingly the most expensive place to insure a car is London, where motorist pay an average quoted premium of £922.44, postcodes in Essex beginning IG came in second at £912.07, and Greater Manchester was third most expensive at £820.63.


The cheapest place to insure a car in the UK is Isle of Man at £231.49, followed by postcodes beginning KW in the extreme north-east of Scotland at £252.13. The cheapest mainland postal area for car insurance is TR postcodes in the south-west of Cornwall at £279.72 – less than a quarter of the average paid in London.


Connor said postcodes played a large part in insurance premiums alongside age and experience of the driver and the make and model of the car.


‘The premium reflects the likelihood of a claim being made and, in some urban areas, there is much greater risk of collision taking place, or of car crimes such as theft of or from a vehicle, uninsured driving or attempt at ‘cash for crash’ fraud,’ she said.


‘Sadly the criminality of some people has a detrimental effect on the premiums paid by honest motorists in such places.’


However, she added that some of the biggest falls in premiums over the past year have been in the postcodes that have traditionally paid the highest premiums.



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