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10

Huge £1.5bn potential saving for car insurance customers

Open-access content Monday 24th October 2016 — updated 5.50pm, Wednesday 29th April 2020

Drivers could collectively save £1.5bn a year in car insurance by switching from a monthly payment to an annual one according to insight by MoneySuperMarket.

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The price comparison site found that drivers who pay for their premiums monthly spend £622 on average compared to £549 for those who pay annually.

After analysing more than 24 million car insurance quotes it was found that 45.5% choose to pay the more costly method, paying on average 13.3% more than necessary.

Site consumer affairs expert, Kevin Pratt, said: "Paying for your car insurance in one lump sum is a big ask, given that average premiums are well north of £500, so it's no wonder that millions of people opt to pay monthly.

"But insurance companies effectively charge interest when you take that route, typically slapping another £73 onto the cost - so if you can avoid instalments, you'll save money in the long run."

Paying monthly has increased year-on-year, from 43.5% in September 2014 to 45.2% last year and 45.5% in 2016, with drivers able to save £9 more this year then they were the last.

The hardest hit are young drivers aged 25-29, whose premiums have increased by 21% since 2015.

"Ultimately, whether you're paying monthly or annually, there are always additional savings to be made," Pratt said.

"With premiums rising year-on-year it's worth shopping around for a cheaper deal - there are savings of up to £247 to be made by switching suppliers on renewal, so it's worth checking."

Drivers in St Albans have seen the highest year-on-year price hikes with premiums rising by 21%, followed by those in Harrow at 20%, with Southall, North London and Sutton all rising by 19%.

Aberdeen motorists saw the smallest price rise at 7% while those in Newcastle upon Tyne saw a rise of just 9%.

This article appeared in our October 2016 issue of The Actuary.
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