PREMIUM DRIVERSDECEMBER 2019

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 marginally increases to 15.49%, up from to 15.39%

• 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 Q4

(September 2019 – November 2019)

has increased slightly over the past

three months to 15.49%, up from

15.39% last quarter. The savings

variable has remained significantly

lower than its peak of 17.62% in the

first quarter of 2017.

The savings variable remaining

broadly flat follows recent drops in the

difference between the cheapest and

average premium. This comes after

years of growth up to the start of 2017.

The measure stood at its highest level

in the last quarter of 2016 at 17.62%,

which is the largest savings variable

since records began.

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.

A lower savings variable could signal

a downward trend in premiums if it

continues. The fall could be good news

for drivers as a narrowing gap suggests

a higher level of competition amongst

providers which may lead to lower prices

as insurers battle to win customers with

better offers.

Despite some downward pressure on

prices, the fact remains that drivers are

still paying hundreds of pounds more for

their car insurance than several years

THE SAVINGS VARIABLE

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We have seen little change in this past quarter

on the savings variable. 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 providers

are reducing prices to attract new customers.

Following this, we could see a corresponding

decline in premiums as providers undercut

competition to win customers

Dan Hutson, Head of Motor Insurance at comparethemarket.com

ago. This price 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

November 2018 15.76%

December 2018 16.51%

January 2019 15.46%

February 2019 15.55%

March 2019 15.63%

April 2019 15.65%

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%

Savings variable across all age groups year on year August 2018 – August 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

May

19

Sept

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 Q4 2019 (September – November)

significantly increased over the last

quarter and now stands at £730 – an

increase of £23 compared to the previous

quarter’s £707. This increase could signal

further hikes to premiums in the near

future as the effects of proposed policy

changes becomes clearer.

The latest rise follows a downward

trend in average premiums, which

over the previous three quarters

decreased by £37 to £707 – the lowest

level in three years. The last time

average premiums were close to this

price was the third quarter of 2016,

at £697.

Whilst premiums have historically

fluctuated throughout the year, average

premiums remain lower than the same

time last year. In Q4 2018, average

premiums were £744, so premiums have

decreased by £13 year-on-year.

Premiums remain considerably higher

than when Premium Drivers records

began in September 2012. The average

premium stood at £559 in the last

quarter of 2012 before rising to a peak

of £758 in Q4 2017 – almost a £200 price

difference. Increases in premiums over

this time frame were driven in part by

hikes to the Insurance Premium Tax

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WHAT IS THE COST?

(IPT) and changes to the personal injury

discount rate.

The latest increase in premiums could

be driven again by policy issues,

including the rumored delay of the

changes to whiplash reforms. If they

are enacted, these reforms will likely

reduce premiums. While insurers may

have begun pricing in those changes,

it is probable that they have increased

premiums to factor in the potential

delay. In addition, the recent changes

Key Statistics• Quarterly average premium jumps to £730 up from £707 in the previous quarter

• Premiums have increased after recent reductions, up by £23 in the quarter

• Cheapest average premium available also increased to £617 from last quarter

• Last quarter was the lowest average premium for three years

Sadly for Britain’s motorists the recent downward trend for cheaper premiums has stalled. While premiums tend to be higher towards the end of the calendar year, claims inflation, mooted delays to whiplash reform and the change in the way the Ogden rate is calculated could all be driving premiums up. These factors could continue to weigh on the cost of car insurance going into 2020.

“One of the easiest ways to save money on your car insurance is to switch provider regularly. The difference between the cheapest and average premium stands is over £100 – far more than small change for most people.

to the Ogden rate and broader claims

inflation could also be contributing to

the increase in premiums.

The gap of £113 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 between the ages of 17 and

24, the difference is even higher: the

average young person can save £235 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

£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

Dec

12

Mar

13

Jun

13Se

pt 1

3D

ec 1

3M

ar 1

4Ju

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

9

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.