PREMIUM DRIVERSAPRIL 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 rises to 15.84%, down from 15.55% last quarter

• 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 Q1

(December 2018 – February 2019) has

expanded over the past three months

to 15.84%, up from 15.55% last quarter.

The savings variable has remained

significantly lower than its peak of

17.62% in the first quarter of 2017.

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.

Over the past two years the savings

variable has narrowed, which could

indicate that the market has become

more competitive. However, the savings

variable saw a slight increase on a

quarter-on-quarter basis, increasing

from 15.55% in Q4 2018, as insurers

introduced large reductions on the

average premiums but did not drop the

average cheapest price by as much of

a margin.

The structural reduction in the savings

variable over the past two years has

begun to be reflected in premiums,

which have significantly dropped in the

past three months. However, this latest

small increase in the savings variable

is the second in a row, which could

lead to a return of reduced competition

amongst providers.

The lower level of competition may lead

to higher prices in future, as insurers

come under less pressure to win

customers through offering lower prices.

However, motor insurance premium

pricing tends to be seasonal, and the

cost of policies often rises towards the

end of the year, which may have had

an impact on the current state of

the market.

Despite some downward pressure on

prices, the fact remains that drivers are

still paying hundreds of pounds more

for their car insurance than they did

several years ago. This price difference is

exacerbated for drivers who fail to shop

around, as renewal prices tend to be

significantly more expensive.

The savings variable

3

The savings variable can be a helpful

indicator of the current levels of

competition in the marketplace, with

a wider gap between the cheapest and

average premiums suggesting that

providers are not reducing prices to attract

new customers. The latest data, while

showing a slight increase on a quarter-on-

quarter basis, demonstrates the reduction

in competition over the past two years

which has coincided with a flattening of

prices after a prolonged period of hikes.

Simon McCulloch, Director at comparethemarket.com

4

Month Savings variable

March 2018 16.20%

April 2018 16.40%

May 2018 15.92%

June 2018 15.34%

July 2018 15.54%

August 2018 15.49%

September 2018 15.43%

October 2018 15.47%

November 2018 15.76%

December 2018 16.51%

January 2019 15.46%

February 2019 15.55%

Savings variable across all age groups year on year March 2018 – February 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£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

Q1 2019 dropped marginally over the

last quarter and now stands at £736 – a

reduction of £8 compared to the previous

quarter’s £744. However, within the

past three months there has been a

significant reduction in premiums of £100.

In December 2018, the average premium

stood at £790 - the highest it has been since

Premium Drivers records began. However,

costs plummeted in January and February

2019 to £727 and £690 respectively.

While premiums have historically fluctuated

throughout the year, the reduction

in premiums is more pronounced this

year, indicating a more structural fall in

premiums. comparethemarket.com’s

analysis of the premium reductions

between December 2018 and February 2019

shows that the average fall in the three

months has been £65 over the past six

years - £35 lower than the reduction

this year.

The small reduction in the quarterly

average premium masks the more

significant reduction in a month-on-month

basis. The three-month average fell by only

£8 as a result of the exceptionally high

premiums in December.

However, the more significant reduction

in premiums over the last two months

5

What is the cost?

does not necessarily mean that we will

see a significant reset of insurance costs in

the coming months. Premiums increased

significantly over the past few years as a

result of a number of Government changes,

such as hikes to Insurance Premium Tax

(IPT) and changes to the personal injury

discount rate. These changes will likely

keep premiums comparatively high for the

foreseeable future until any further reforms

are implemented.

The cheapest premiums available on the

market have held broadly flat for another

quarter, dropping by £9 to £619. The

cheapest premiums have held within a £20

range for six consecutive quarters. In line

with the increases to average premiums,

Key Statistics

• Quarterly average premium falls to £736,down from £744 in the previous quarter

• Cheapest average premium available has also dropped to £619, from £628 last quarter

• £100 drop in average premiums between December and February

• Recent reduction in premiums follow whiplash changes and reduction in car registrations

This is the first bit of good news for British motorists in a long time.

Insurance prices have been on a relentless upwards march since 2012.

Seeing a £100 drop in insurance costs between December and February

indicates that a more structural reduction in premiums is taking place.

These reductions in cost follow recent changes to the law around whiplash

claims, passed in December 2018 and due to come into force next year.

This is also likely aided by the reduction in the number of car registrations

in the past six months, which suggests that insurers are having to

compete more to win a larger share of a smaller market. With the review

of the Ogden personal injury discount rate now under way, there is hope

for motorists keen to see further reductions of their premiums.

Simon McCulloch, Director at comparethemarket.com

the cheapest premiums have significantly

increased since Premium Drivers records

began in September 2012. The average

cheapest premium stood at £471 in the

last quarter of 2012 before rising to a peak

of £629 in Q4 2017 – a £158 difference.

The gap of £116 between the cheapest

and average premiums over the last

quarter shows that shopping around

remains the most effective way to save

money on car insurance. For younger

motorists between the ages of 17 and 24,

the difference between the two is much

higher. The average young person can

save £263 by switching to a better deal

according to comparethemarket.com’s

latest Young Drivers report.

6

Average price difference

Cost difference between the cheapest and average premiums

Average Premium Cheapest Premium

Sep

12

Dec

12

Mar

13

Jun

13

Sep

13

Dec

13

Mar

14

Jun

14

Sep

14

Dec

14

Mar

15

Jun

15

Sep

15

Dec

15

Mar

16

Jun

16

Sep

16

Dec

16

Mar

17

Jun

17

Sep

17

Dec

17

Mar

18

Jun

18

Sept

18

Dec

18

£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

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

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.