PREMIUM DRIVERSJUNE 2020

A quarterly motor insurance “savings index” by

THE SAVINGS VARIABLE

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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 drops to 15.30% in the past quarter, down from to 15.98%, and now at its

second lowest point since records began

• The significant fall in difference between average and cheapest premiums is down further from its peak

of 17.62% in Q1 2017

The latest Premium Drivers report

has found that the savings variable

in Q2 (March 2020 – May 2020) has

fallen dramatically over the past three

months to 15.30%, down from 15.98%

in last quarter. The savings variable

has consistently remained significantly

lower than its peak of 17.62% in the first

quarter of 2017.

The savings variable has now hit the

second lowest level since records began

with the lowest being in Q3 2013 at

14.95%. This significant fall comes after

a steady decline from its peak in 2017.

The reduced difference between the

average and cheapest premium three

years ago suggests that more drivers have

been shopping around for their motor

insurance, resulting in more pricing

competition between insurers as people

take advantage of significant savings.

On a monthly basis, the savings variable

has remained largely flat. In March,

it stood at 15.38% then fell to 15.16%

in April, before rising again to 15.37%

in May. The overall higher level of

competition may lead to lower prices in

future, as insurers come under pressure

to win customers through offering

lower prices.

Despite the significant downward

pressure on prices resulting from the

pandemic, the fact remains that

drivers are still paying a significant

amount more for their car insurance

than they need to. This price

THE SAVINGS VARIABLE

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In the past quarter, we have seen a significant

fall in the savings variable, meaning that the

difference between the average and cheapest

premium available has decreased. 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 competition

levels have increased. Following this, we could

see a corresponding reduction in premiums as

providers are incentivised to cut prices to attract

and retain customers.

Dan Hutson, Head of Motor Insurance at comparethemarket.com

difference is exacerbated for drivers

who fail to shop around, as renewal

prices tend to be significantly more

expensive.

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Month Savings variable

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%

December 2019 16.35%

January 2020 15.84%

February 2020 15.75%

March 2020 15.38%

April 2020 15.16%

May 2020 15.37%

Savings variable across all age groups year on year May 2019 – May 2020:

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

Jan

20

May

20

£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%

Xx June 2020– The average car insurance

premium fell by over £50 over the

past three months, according to the

latest Premium Drivers report from

comparethemarket.com. In Q2 2020

(March – May 2020), premiums fell 7%

to £702 – a drop of £53 compared to the

previous quarterly price of £755. The

decline in premium prices makes this

quarter the cheapest since Q3 2016 when

the average quarterly premium stood at

£698, and highlights the impact that the

coronavirus lockdown has had on car use

and the wider insurance industry.

Over the past five years there have been

a number of changes to Government

policy which have forced premiums up,

including hikes to Insurance Premium

Tax (IPT), delays to the whiplash reform

and changes to the Ogden rate which

drove up the cost of claims. However, the

insurance industry has faced significant

changes over the past three months as

Government restrictions have forced

many cars off the roads, in turn reducing

the volume of claims and pushing

premiums down.

On a monthly basis, the average premium

dropped by £33 from £712 in March to

£679 in April followed by a £36 rise in May

reaching a similar level to pre-lockdown

of £715. April 2020 represents the lowest

5

WHAT IS THE COST?

monthly premium since March 2016 when

the average policy cost £658.

In May, the Financial Conduct Authority

encouraged all car insurance providers

to reassess the risk profile of customers

which may have changed significantly

because of the coronavirus. In addition, it

asked motor insurers to waive cancellation

and other charges associated with

adjusting policies. This is welcome support

for drivers as, despite fewer drivers on

the roads and fewer claims, the average

premium appears to only have temporarily

dipped in April and is now back on the

Key Statistics

• Quarterly average premium drops by £53 to £702 – the lowest average quarterly premium since Q3 2016

• Premiums have fallen by 7% in the last quarter as the coronavirus lockdown has forced drivers off the road

and insurers to reduce their prices

• Average premium in April was £679, the lowest for over four years, as lockdown impacts claims

The most common word used to describe the impact of the coronavirus is

unprecedented. A drop in premiums, after years of rising costs, will be welcome

news to the many families struggling financially as a result of the lockdown.

That said, we would hope that premiums fall further over the coming months,

as insurers are urged by the FCA to consider whether customers are currently

getting value from their policies in the light of the current circumstances.

“For those looking to reduce their premiums further, there are a number of steps

that you can take. Our research shows that the difference between the cheapest

and average premium is £108. Switching provider is a quick and easy way to

reduce the cost. If you already have a motor insurance policy and coronavirus

has affected your driving habits, you may want to notify your insurance provider.

For example, if you are no longer commuting and are going to be working from

home for the foreseeable future, there is a chance your provider could reduce

your premium. Equally, it is worth telling your provider if you no longer expect

to use your vehicle as much as you normally would, as a reduction to your

anticipated annual mileage could also positively affect your premium.

rise at a time when many households will

struggle to afford higher bills.

The cheapest premiums available on the

market have also fallen lower. Over the past

three months, the average cheapest policy

available cost £595, compared to £634 in the

previous quarter. The gap of £108 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 under

24 years old, the difference is much higher,

with the average young person able to save

£203 by switching to a better deal.

Dan Hutson, Head of Motor Insurance at comparethemarket.com

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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

Mar

20

£150.00

£140.00

£130.00

£120.00

£110.00

£100.00

£90.00

£80.00

£70.00

£60.00

£800.00

£700.00

£600.00

£500.00

£400.00

£300.00

Sept

12

Dec

12

Mar

13

Jun

13Se

pt 1

3D

ec 1

3M

ar 1

4 Ju

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

9D

ec 1

9M

ar 2

0

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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.