Motorists beware – renewing your car insurance in December will cost you more than at any other time of year.
New research has revealed that people who renew during December pay almost £100 more than those who insure in February.
Which? takes a look when car insurance renewals are most expensive and how you can get a better deal.
The worst month for car insurance
Drivers who insure their cars in December may pay more than 15% more than those who insure in Feburary, the cheapest time of year, research by MoneySuperMarket found.
The price comparison website analysed over seven million car insurance quotes between January 2015 and October 2017.
A fully comprehensive policy taken out in December 2016 costs on average £644. By contrast, those who insured two months later in February 2017 paid £544.35.
The same price difference was seen the year before. Those who took out a policy in December 2015 paid an average of £582.62 while those who insured in February 2016 paid £496.01 – a 14.8% difference.
One of the main factors for the hike in premium prices in December is the rise in the number of drivers on the road, combined with icy conditions – which increases the chance of accidents occurring.
- Find out more: car insurance explained.
Premiums rising year-on-year
Aside from monthly fluctuations, car insurance premiums have also seen a sharp rise over the last two years. The average price of a fully comprehensive policy has risen from £530 a year to £577.92 a year.
Northern Ireland has seen the highest jump, with premiums rising 17% over the last two years, from £450.75 to £539.72.
Why are car insurance premiums rising?
Reforms to the Discount Rate in March this year contributed significantly to the rise in car insurance premiums.
The Discount Rate, also known as the Ogden Rate, is used by the courts to decide how much insurance companies should pay in compensation for personal injury claims. A lump sum is calculated, and then a discount is applied – determined by the Discount Rate – to take into account possible profits from investment.
Since 2001, the Discount Rate was set at 2.5%, but the government reduced this to -0.75% in March 2017. This led to a sharp rise in the cost of compensation paid out by insurers.
This additional cost was passed onto customers, adding £75 to the cost of an average car insurance policy, according to PwC.
The Government have since decided to partially reverse the decision, following a consultation. In September it was announced that the Discount Rate will rise to somewhere between 0% and 1% in early 2018.
Although this will eventually reduce the cost of compensation payments for insurers, it remains to be seen whether the reduction will be passed on to motorists.
- Find out more: how to find cheap car insurance.
Insurance premium tax hike
The Government’s increase of the insurance premium tax (IPT) has also contributed to the rise in insurance premiums.
IPT is the tax levied on insurance premiums by the government. Insurers often pass this cost on to their customers by raising premiums.
There are two different rates of IPT. The first is a standard rate, which affects general insurance policies such as car insurance, pet insurance and home insurance.
The second is a higher rate for travel insurance, mechanical insurance and electrical appliances insurance.
Since October 2015 the standard rate of IPT has risen four times, doubling from 6% to 12% – and premiums have steadily increased as a result.
|Rates||From 1st June 2017||From 1st Oct 2016 to 31st May 2017||From 1st Nov 2015 to 30th September 2016||From 4th January 2011 to 31st October 2015|
- Find out more: best and worst car insurance companies.
What can I do?
Whether you are looking to insure your car or renew your policy, shopping around for the best deals can help you save on your premium.
Take a look at our short video on how to buy the best car insurance.
For more help and useful tips on how to find a car insurance policy, take a look at our comprehensive guide.
Or, have a read of our car insurance reviews to help you get a better idea of the different policies available.