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Car insurance: are you paying more to drive less?

Drivers with lower mileage pay hundreds more for car insurance

Car insurance: are you paying more to drive less?

More than 19 million drivers are potentially being overcharged for their car insurance thanks to the ‘low mileage penalty’, according to new research.

Motorists driving fewer than 7,000 miles a year pay on average £180 more than people who drive more, according to pay-per-mile insurer By Miles’ analysis of data from MoneySupermarket.

By Miles says that since the average distance driven in a year is 7,090 miles, nearly 19.3 million drivers could be being overcharged.

Here, Which? looks at why driving less could cost you more, and explains ways you can cut the cost of your car insurance.

What is the ‘low mileage penalty’?

The way insurers price car insurance is complex, and a huge number of factors – including your age, claims record and driving history – are taken into account.

Mileage does play a part, but as this report shows, lower mileage won’t necessarily get you a lower premium.

By Miles says that people with low annual mileage are 50% less likely to make a claim overall – so it would be reasonable to assume that they would pay less for their insurance. However, people who drive less actually pay more on average.

Here’s an example: the most common mileage bracket from the data was 5,000 to 6,000 miles. People driving this far each year were found to be paying £215 more than drivers going double that distance (11,000 to 12,000 miles).

Drivers aged 25 to 29 years are particularly hard hit, paying £239 more, but the penalty appears to exist across nearly all age groups. Only 17 to 19 year olds and those over 65 are rewarded with cheaper premiums for driving fewer miles.

The table below shows the average cheapest quote for each mileage bracket in 2018 and 2019, based on this research:

On the plus side, you can see that car insurance prices fell between 2018 and 2019. They are now at their lowest level in four years.

However, average low-mileage premiums are often far higher than their high-mileage counterparts. The only drivers who paid more than those doing 5,000 to 6,000 miles last year were those driving over 25,000.

How many people are affected?

More than 19 million cars had MOTs last year, according to the Department of Transport, and 60% of them drove under the UK average of 7,090 miles a year.

By Miles has extrapolated this to the 32 million registered cars in the UK to estimate that 19.3 million low-mileage drivers have had to pay more.

MOT data doesn’t include cars less than three years old, so it’s possible that this isn’t the exact number that will have been affected. But still, we’ll be looking at a very large number.

How can I get cheaper car insurance?

If you think you’ve fallen victim to the ‘low mileage penalty’, or even if you haven’t, there are a number of approaches you can take to lowering your car insurance premium.

1. Shop around

Use comparison sites and visit insurers’ websites directly to find the best deal for you. But remember it’s not always about what’s cheapest. You also need to find the best value and a policy that suits your needs.

Read our expert car insurance reviews to find out what each insurer is offering. We also have a guide to finding cheap car insurance if you want more tips.

2. Try a non-traditional insurer

By Miles carried out this research to draw attention to how much cheaper their pay-per-mile model could be for lower-mileage drivers.

While traditional insurers usually ask for an annual estimate, providers offering a ‘pay as you drive’ model only charge customers for the miles they’ve actually driven.

3. Black box insurance

This involves having a ‘black box’ GPS tracker in your car that sends data on your driving to your insurer.

The idea is that drivers, especially younger people (who are more likely to face higher premiums), can prove how safe and careful they are and qualify for cheaper insurance prices.

However, telling your insurer where and how you’re driving at all times might be a bridge too far when it comes to giving up personal data for some.

4. Get a refund or go off road

Thanks to the order to ‘stay at home’, fewer vehicles have been on the road during lockdown. This led some insurers to offer refunds to customers, and others to encourage customers to get in touch if they were facing financial hardship.

If you’re not driving your car at all, you can declare it off road with a Statutory Off Road Notification (SORN). This means you don’t need car insurance, but you’ll have to park it in a garage or on a driveway as all cars on public land must be insured.

And of course if you declare your vehicle as being off the road, you can’t drive it again until you get a new insurance policy.

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