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PREMIUM DRIVERSDECEMBER 2019
A quarterly motor insurance “savings index” by
THE SAVINGS VARIABLE
2
The Premium Drivers index reveals the monthly percentage difference
– or the “savings variable”– between the cheapest and average quotes
across all age groups.
This is tracked throughout the year and compared quarter on quarter.
The “savings variable” tells us about current and historic prices, it also
provides insight into the motor insurance sector.
It highlights cyclical trends and allows comparethemarket.com to
make statistics-driven predictions on the future direction of the motor
insurance market.
If the difference between the cheapest and the average price is
narrowing, it suggests competition may be improving; if the price
disparities are widening, then it suggests competition may be weakening.
Key Statistics
• Quarterly savings variable marginally increases to 15.49%, up from to 15.39%
• The difference between average and cheapest premiums remains significantly lower
than recent years since its peak of 17.62% in Q1 2017
The latest Premium Drivers report has
found that the savings variable in Q4
(September 2019 – November 2019)
has increased slightly over the past
three months to 15.49%, up from
15.39% last quarter. The savings
variable has remained significantly
lower than its peak of 17.62% in the
first quarter of 2017.
The savings variable remaining
broadly flat follows recent drops in the
difference between the cheapest and
average premium. This comes after
years of growth up to the start of 2017.
The measure stood at its highest level
in the last quarter of 2016 at 17.62%,
which is the largest savings variable
since records began.
The large difference between the average
and cheapest premium two years ago
suggests that drivers were not shopping
around for their motor insurance,
resulting in less pricing competition
between insurers and people potentially
missing out on significant savings.
A lower savings variable could signal
a downward trend in premiums if it
continues. The fall could be good news
for drivers as a narrowing gap suggests
a higher level of competition amongst
providers which may lead to lower prices
as insurers battle to win customers with
better offers.
Despite some downward pressure on
prices, the fact remains that drivers are
still paying hundreds of pounds more for
their car insurance than several years
THE SAVINGS VARIABLE
3
We have seen little change in this past quarter
on the savings variable. The savings variable
can be a helpful indicator of the current levels
of competition in the marketplace, with a
narrower gap between the cheapest and
average premiums suggesting that providers
are reducing prices to attract new customers.
Following this, we could see a corresponding
decline in premiums as providers undercut
competition to win customers
Dan Hutson, Head of Motor Insurance at comparethemarket.com
ago. This price difference is exacerbated
for drivers who fail to shop around, as
renewal prices tend to be significantly
more expensive.
4
Month Savings variable
November 2018 15.76%
December 2018 16.51%
January 2019 15.46%
February 2019 15.55%
March 2019 15.63%
April 2019 15.65%
May 2019 15.63%
June 2019 15.40%
July 2019 15.50%
August 2019 15.27%
September 2019 15.37%
October 2019 15.28%
November 2019 15.81%
Savings variable across all age groups year on year August 2018 – August 2019:
Premium Drivers: The savings variable:
Average Premium Cheapest Premium Savings Variable
Sept
12
Jan
13
May
13
Sept
13
Jan
14
May
14
Sept
14
Jan
15
May
15
Sept
15
Jan
16
May
16
Sept
16
Jan
17
May
17
Sept
17
Jan
18
May
18
Sept
18
Jan
19
May
19
Sept
19
£900.00
£800.00
£700.00
£600.00
£500.00
£400.00
£300.00
£200.00
£100.00
£0.00
20.00%
18.00%
16.00%
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
The average car insurance premium
in Q4 2019 (September – November)
significantly increased over the last
quarter and now stands at £730 – an
increase of £23 compared to the previous
quarter’s £707. This increase could signal
further hikes to premiums in the near
future as the effects of proposed policy
changes becomes clearer.
The latest rise follows a downward
trend in average premiums, which
over the previous three quarters
decreased by £37 to £707 – the lowest
level in three years. The last time
average premiums were close to this
price was the third quarter of 2016,
at £697.
Whilst premiums have historically
fluctuated throughout the year, average
premiums remain lower than the same
time last year. In Q4 2018, average
premiums were £744, so premiums have
decreased by £13 year-on-year.
Premiums remain considerably higher
than when Premium Drivers records
began in September 2012. The average
premium stood at £559 in the last
quarter of 2012 before rising to a peak
of £758 in Q4 2017 – almost a £200 price
difference. Increases in premiums over
this time frame were driven in part by
hikes to the Insurance Premium Tax
5
WHAT IS THE COST?
(IPT) and changes to the personal injury
discount rate.
The latest increase in premiums could
be driven again by policy issues,
including the rumored delay of the
changes to whiplash reforms. If they
are enacted, these reforms will likely
reduce premiums. While insurers may
have begun pricing in those changes,
it is probable that they have increased
premiums to factor in the potential
delay. In addition, the recent changes
Key Statistics• Quarterly average premium jumps to £730 up from £707 in the previous quarter
• Premiums have increased after recent reductions, up by £23 in the quarter
• Cheapest average premium available also increased to £617 from last quarter
• Last quarter was the lowest average premium for three years
Sadly for Britain’s motorists the recent downward trend for cheaper premiums has stalled. While premiums tend to be higher towards the end of the calendar year, claims inflation, mooted delays to whiplash reform and the change in the way the Ogden rate is calculated could all be driving premiums up. These factors could continue to weigh on the cost of car insurance going into 2020.
“One of the easiest ways to save money on your car insurance is to switch provider regularly. The difference between the cheapest and average premium stands is over £100 – far more than small change for most people.
to the Ogden rate and broader claims
inflation could also be contributing to
the increase in premiums.
The gap of £113 between the cheapest
and average premiums over the last
quarter shows that shopping around
remains an effective way to save
money on car insurance. For younger
motorists between the ages of 17 and
24, the difference is even higher: the
average young person can save £235 by
switching to a better deal.
Dan Hutson, Head of Motor Insurance at comparethemarket.com
6
Average price difference
Cost difference between the cheapest and average premiums
Average Premium Cheapest Premium
Sep
12
Feb
13
Jul 1
3
Dec
13
May
14
Oct
14
Mar
15
Aug
15
Jan
16
Jun
16
Nov
16
Apr
17
Sept
17
Feb
18
Jul 1
8
Dec
18
May
19
Oct
19
£160.00
£140.00
£120.00
£100.00
£80.00
£60.00
£40.00
£20.00
£0.00
£900.00
£800.00
£700.00
£600.00
£500.00
£400.00
£300.00
£200.00
£100.00
£0.00
Sept
12
Dec
12
Mar
13
Jun
13Se
pt 1
3D
ec 1
3M
ar 1
4Ju
n 14
Sept
14
Dec
14
Mar
15
Jun
15Se
pt 1
5D
ec 1
5M
ar 1
6Ju
n 16
Sept
16
Dec
16
Mar
17
Jun
17Se
pt 1
7D
ec 1
7M
ar 1
8Ju
n 18
Sept
18
Dec
18
Mar
19
Jun
19Se
pt 1
9
7
Methodology
All data, other than that referenced
in the footnotes, is sourced from
comparethemarket.com.
When the “average price” is referred
to, this is the mean average of the top
five cheapest prices presented to a
customer, where a consumer has clicked
through to buy. Buying from the top five
cheapest prices presented represents
90% of all car insurance sales. When the
“cheapest price” is referred to, this is the
average cheapest price presented, where
a customer has clicked through to buy.
Premium Drivers calculates the cost
of premiums where the customer has
clicked through to buy the policy. If
the average premium cost was instead
calculated on the basis of all prices
returned then the average cost would be
significantly higher.