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Drivers enjoy lower insurance premiums in 2012

Some insurers cut premiums, but others hike prices

front of car badly damaged in an accident

Average car insurance premiums have fallen slightly, but you can save much more by shopping around

The cost of a typical comprehensive car insurance policy fell in the first quarter of 2012, according to the most recent AA British Insurance Premium Index.

At the end of March, the average ‘shoparound’ quote, based on the five cheapest premiums from a range of insurers, had dropped by 1.1% to £1,132.  Insurance quotes obtained via price comparison sites showed a fall of 4.3% to an average £737.

Over the full year ending 31 March, the ‘shoparound’ index rose by 7.7%, the smallest 12-month increase since 2008 and far below the record 40.1% annual increase in April 2011.

For young drivers, men aged 17 to 22 saw their premiums fall by almost 1% over the quarter, although those for young women increased by 4.8%.

  • To find the car insurers with the best customer satisfaction and cover levels, read our car insurance reviews.

Cheaper car insurance premiums may not last

Director of AA Insurance Simon Douglas said: ‘The fall in the ‘shoparound’ quotes is welcome news for customers who have seen record premium increases over the past two years. However […], I can’t see this drop in premiums being sustainable for long.  My fear is that if prices do continue to drop, we’ll see a repeat of 2009, when industry losses led to premiums suddenly rocketing up following a long period of little movement.’

On the plus side, Mr Douglas believes that forthcoming changes in the industry will help to bring costs under control: ‘We are already beginning to see the number of uninsured drivers coming down due to better police detection and the introduction of Continuous Insurance Enforcement legislation last year.

‘In addition, insurers are getting smarter at dealing with and exchanging information about fraud, while the new police Insurance Fraud Enforcement Unit is making significant progress in tackling major insurance fraud such as cash-for-crash scams and ghost broking. I also expect new legislation designed to manage no-win no-fee personal injury claims will eventually help reduce costs.’ 

Shop around for cheap car insurance

Which? principal researcher Martyn Saville commented: ‘One of the most interesting things to come out of this new research is the mixed picture across the car insurance market. The average of all quotes in the index showed almost no movement in premiums, with the average quote for comprehensive cover £1,452. Masked by that headline figure, though, is the fact that a few insurers are cutting the cost of car insurance to attract new business, while others have continued to hike up customers’ premiums.

‘So while the the overall insurance market shows little movement in average premiums, you can still cut your own premium just by shopping around when your renewal notice arrives. Watch out for extra charges though – our recent research shows that insurers charge as much as £75 in cancellation fees if you want to switch before the end of your policy period.’

More on this…

  • Car insurance reviews – the Which? guide to finding the best car insurance policy
  • Car insurance charges – how much you’ll have to pay to make changes to your policy
  • Car insurance slip-ups that could cost you money – don’t pay more than you have to
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