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COVID-19 Brings Down Motor Insurance Premiums

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Following the release of data analytics company Consumer Intelligence’s “car insurance price index” in 2020, it is clear that premiums are on the decline

The key statistics

Car Insurance Premiums have fallen by 2.5% from June to December 2020

The average motor premium is now £816

All age groups and UK regions are seeing decreases in price

London has the highest average premium at £1,499. Scotland is the lowest at £513

The reasoning

Insurance premiums are partly determined by the risk itself, the vehicle you drive, how long you’ve had your licence etc. and partly from their own experience. By this we mean a vast array of data that they collect and analyse, and perhaps most crucially, the number and cost of claims that they pay out on.

One of the questions you can almost guarantee to be asked when obtaining a motor insurance premium is how many miles you intend to drive in a year, and the answer you give will generally have an impact on the price you pay. The more miles you drive in a year, the more time you are likely to spend on the road, and the more opportunities there are to be involved in an accident. Also, if your mileage is high, chances are the journies you take will involve a lot of motorway travel. Higher average speeds can result in larger claims, as well as the potential to pull in other road users who can’t react in time.

Due to COVID-19, more people working from home, more restrictions to travel etc. it’s no surprise that there are less cars on the road, and less journeys being made in general. Government figures suggest almost a 20% reduction as a result, and with travel tending to drop off in winter anyway, it is likely to continue. Insurers are finding that they are paying out less on claims as a result, and their prices reflect that.

While motor insurance may seem expensive, this goes some way to show that companies will reduce when the number of claims from UK motorists comes down.

Was it already falling prior to COVID-19?

In short – No.

Taking the 12 months of 2020 as a whole, the reduction was only 1.1%, showing that prices were on the rise prior to COVID-19.

From the same data from Consumer Intelligence, they have tracked a rise of more than 20% since the end of 2013 as a whole, peaking at their highest in 2017.

Will the trend continue?

It’s very tough to predict, and as with a number of things in the UK right now, it will depend on the pandemic, how it changes life going forward, and on Government advice and actions.

For example, even when the country has dealt with the matter, companies may have seen the benefits of remote-working their staff, and if this occurs on a grand scale, the amount of commuter traffic out and about during “rush hour” drop considerably.

On the flipside, if restrictions lift by the summer, but international travel is still very challenging, the roads could become flooded with holidaymakers choosing to stay domestic for their 2021 holidays. The same collisions that would normally rack up in rush hour may happen in coastal holiday destinations during the warmer months instead.

The number of vehicles on the road is just one of the factors that determines average premiums in the UK, and certain trends will start to show. Our article from last month discussing electric vehicles and the impact on motor insurance for example suggests that electric vehicle insurance prices are thought to be higher, to the point where it puts some road users off from even considering them. With the sale of new petrol and diesel cars stopping from 2030, more and more motorists are probably considering the switch.

Whatever premium you usually pay on your motor insurance, there’s always room for more of a saving. GSI Insurance Services (Southern) Ltd. can offer car, van and motorcycle insurance. Give us a call on 0800 612 9376.

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