Car insurance costs fall £55 on average due to quiet lockdown roads

The average annual car insurance premium has fallen by £55 in just three months, new research has revealed.

This is the steepest fall in premiums over a three-month period since 2012, according to data from Compare the Market, when its research began.

The average premium between December 2020 to February 2021 dropped to just £652 – the lowest quarterly average since between July and September 2015 when a typical premium cost £606.

Premiums have also declined by an average of £103 year-on-year, as the pandemic has caused a sharp drop in the cost of insurance, showing the largest 12 month decline on record.

Whilst there is usually a seasonal drop in the cost of car insurance in the first few months of the year, this trend has been significantly accelerated by the coronavirus pandemic and lockdown.

The fall is thanks to the large drop in drivers on the roads, due to lockdown, which has led to a 19 per cent decline in car insurance claims, according to the Association of British Insurers.

Insurers seem to have passed on some but not all of these savings to motorists through lower premiums.

The average cheapest premium available between December 2020 and February 2021 also tumbled by £68 year-on-year, now standing at £560, falling from £603 at the end of last year.

Many lower risk motorists will pay significantly less than this for insurance, whereas this is based on the average driver’s comparisons. 

This drop means there are still significant savings available to drivers who shop around for the best deal when their policy comes to an end.

Motorists can save an average of £92 by switching to the cheapest premium available, according to Compare the Market. 

A drop in the number of inexperienced drivers on the road may also have contributed to the decline in car insurance claims and subsequent fall in premiums.

There has been a 48 per cent drop in the number of people passing their practical driving test in 2020, compared with the previous year, according to the DVLA, as the pandemic prevented or discouraged many people from learning to drive.

However, young drivers have seen the greatest financial benefit from the fall in premiums.

The average cost of car insurance for drivers aged under 25 has sunk to £1,097, down from £1,282 in the same quarter in 2020.

The cheapest premium typically available to these young drivers has also declined to £912.

This means young drivers could save a substantial £185 by switching to the best deal when their premium comes up for renewal.

Dan Hutson, head of motor insurance at Compare the Market, said: ‘Motorists will be thrilled that the cost of car insurance has nosedived in the first quarter of this year. The drop in insurance claims seems to be trickling through to the cost of premiums.

‘Drivers will appreciate the savings as many will be finding it more difficult to manage their finances during the pandemic. Premiums did initially start to sneak upwards in December 2020 but have since plummeted during the latest lockdown.

‘This fall will be particularly good news for young drivers who typically face the highest premiums. Hopefully, more people will be encouraged to learn to drive as travel curbs are lifted and the fall in premiums makes it more affordable.’

Drivers looking to save money on their car insurance are encouraged to shop around when their policy comes up for renewal. Read This is Money’s ten tips for cheaper car insurance to find out the best ways to do this.