Comprehensive car insurance premiums dropped by 16% in the third quarter from the same period in 2020, the steepest fall in seven years, as fewer cars on the roads due to COVID-19 restrictions led to a lower number of claims, a survey showed.
The latest car insurance price index by Confused.com and Willis Towers Watson showed that the average car insurance now costs £514 a year, the lowest in six years.
But prices could start to rise again as workers return to the office and road traffic increases following the lifting of lockdown restrictions, although the price outlook for 2022 is "extremely uncertain" due in part to supply chain disruptions, the survey report said.
Prices have fallen for six out of the last seven quarters, although the rate of decline slowed between July and September compared to the first half of this year, the survey showed.
“The downward trend in prices has continued for four consecutive quarters, driven primarily by the lower exposures and claims experience resulting from the COVID pandemic,” said Stephen Jones, UK P&C Consulting Lead at Willis Towers Watson.
“However, the rate at which prices are falling has slowed in the last three months, explained in part by the increased number of commuters returning to driving since the easing of lockdown rules, UK summer staycations and other changed driving patterns.”
The Financial Conduct Authority (FCA) announced last spring that a ban on 'price walking' – the process whereby insurance firms increase home and motor insurance premiums for existing customers who automatically renew their policy – would take effect from January 2022.
“The FCA’s price walking ban from 1 January 2022 has received significant senior management attention during 2021 and consumed significant amounts of insurers’ pricing resources," Jones said. "The pricing impacts of these efforts will emerge in the months ahead. Together with the widespread supply chain issues affecting many industries including automotive repairs, the outlook on pricing for 2022 is extremely uncertain.”
Louise O’Shea, CEO at Confused.com comments: “It’s likely that prices could start to creep up as people return to work and people are spending more time travelling on the road, which all means the risk of accidents is a lot higher. We’re already starting to see this in some areas of the UK. And this will mean that the overall price of insurance will increase, which means the cost of renewal will too.”
Shares in Admiral Group Plc (LSE:ADM) were 1.5% lower at 2,962p, while Direct Line Insurance (LSE:DLG) Group PLC fell 1.42% to 278.10p.