If you have renewed your car insurance policy over the last few months, you may have noticed an increase in the cost since your last renewal.
A new report on car insurance prices for the last quarter of 2015 has revealed a sharp spike in premiums over the last months and an increase over the year as a whole, following three years of falling prices. There is no indication that a subsequent fall is coming. In fact, the rise in price looks set to continue over the months to come.
In the largest price increase for five years, the average driver is paying £43 more for car insurance than in the third quarter of 2015, and £78 more than they were spending a year ago. What has caused the price hike? There are several factors at work, one of which is the increased tax on motor insurance policies. This rise in Insurance Premium Tax was announced as part of George Osborne’s summer Budget in July 2015, and came into effect in November. It is thought that car insurance companies may have been lowering premiums for some time in order to remain competitive, and are now no longer able to do so, causing a sudden rise.
Surprisingly, it is older drivers who will experience the greatest increase in insurance costs. Premiums for men aged between 61 and 65 went up by 10% in the last quarter of 2015, while insurance for women in their 70s has gone up 19% over the year.
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Some groups of motorists, however, will see their premiums remain at the same level, or even experience a welcome decrease. Costs for women under 21 have risen more slowly than the average, just 4% compared to 7% in the industry as a whole. For younger male drivers, fully comprehensive cover has actually dropped in price. Across the UK, drivers in Northern Ireland have seen the steepest rise in premium prices, followed by the Scottish Highlands and Irelands, the east and northeast of Scotland, and southeast England.
As well as motorists, the price increase will affect the motor trade, as buyers of new and used cars look for vehicles that are cheaper to insure. This could be a good time to make the switch to a vehicle in a lower insurance category, or, alternatively, to balance out the cost of insurance by getting a bargain on a more powerful car.