The Average Cost of Car Insurance UK | How is it Calculated? | Bobatoo

What is the Average Cost of Car Insurance?

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For all UK drivers, is it vital that they purchase a car insurance policy to cover them while out on the road, not only for financial security, but also because it is a legal requirement in the UK - if you don't have a policy while driving, this could land you in some serious trouble.

While an essential expense, drivers often find that it is an expensive one at that, and many motorists are either paying too much for cover or simply don’t know what the average price is, so they may feel that the deal they currently have is a good one.

In the world of insurance, it certainly pays to do your research and our guide is here to help. Here, we tell you the average cost of car insurance, explain how it is calculated, why premiums can be so expensive, and we provide you with a list of easy tips to help you cut the cost.

In this guide:

What is the average cost of car insurance?

The impact of Coronavirus on car cover

How is car insurance calculated? - Manual vs Automatic

The average cost by age

Car insurance rates by sex - Is there still a gender gap?

Why is car insurance so expensive?

How to save money on car insurance

Third party cover VS fully comp

When is the best time to get car insurance?

What is the average cost of car insurance?

Unfortunately, there is no straight answer to this question, as the cost of cover can vary between individuals and car insurance providers. Prices can also fluctuate throughout the year as insurers compete with each other on prices and if major life events take place, such as the Coronavirus pandemic, but the cost also largely depends on your personal details and driving history.

While we can’t give you an exact number for the average price, we can tell you what industry experts say.

Last year in 2019, a study carried out by the Statista Research Department found that younger drivers paid more for fully comprehensive cover than older, more experienced drivers, with a policy for a 20-year-old costing an average of £850 and car insurance for a driver in his/her 30s was £639.

The Association of British Insurers (ABI) reported that the average motor premium in 2019 was a much lower £471, while according to Confused.com’s Car Insurance Price Index for 2019, the average premium was as much as £815 by the end of the year, with premiums rising by 5.4% (roughly £42) on average.

The impact of Coronavirus on car insurance

The average figures from 2019 have been largely affected this year due to the Coronavirus pandemic. With most people staying at home during lockdown, the roads have been much quieter and insurers have experienced a significant drop in the number of claims being made on policies for car accidents.

As a result, car insurance premiums are now the lowest they’ve been since 2015 for many drivers, but some may face higher premiums depending on their circumstances.

Since the beginning of 2020, premiums have dropped by 6.5% according to Compare the Market, with the average price of fully comp cover costing just £460 in the second quarter of the year, according to the ABI.

Learn more: The Car Insurance Industry Sees Cheapest Premiums Since 2015

How is car insurance calculated?

The average prices for car insurance listed above differ significantly, as there are many different factors that can affect the cost of cover so it varies from driver to driver.

To determine the overall cost, your car insurance company will assess the level of risk that you pose to them, such as how likely it is that you’ll be involved in an accident and make a claim on your policy. The higher the risk you pose, the more expensive your insurance will be.

To assess your risk level, insurers will look at the following information to determine the cost of your car insurance premiums, as well as related facts and statistics:

  • Your age
  • Your job
  • Where you live and where you park your vehicle during the night
  • The make and model of your vehicle
  • Your mileage
  • How long you’ve been driving on UK roads
  • Your driving history (i.e any accidents or claims, etc.)
  • Your no claims bonus (also known as no claims discount)
  • If you have any named drivers on your policy
  • How much voluntary excess you want to pay

Manual vs automatic

The transmission of your vehicle also has a significant bearing on the cost of your policy. According to data from Money Supermarket, automatic vehicles are typically charged 20% more for insurance, with one example of a manual car insurance policy costing £465.94 and an automatic costing £560.01.

The increase in cost is mainly due to the fact that it would cost more for insurers to replace the parts of an automatic vehicle than it would with a manual car, so insurers need to account for this extra potential cost if you were to have a car accident and claim on your policy with them.

Average car insurance cost by age (UK)

While the above factors have a large influence on the cost of your cover, your age is probably one of the most significant factors that determine the cost.

Data provided by Statista shows the following average prices by age in the UK:

Age
Average Car Insurance Cost
20 £851
25 £719
35 £639
45 £575
55 £468
65 £491
75 £752

As you can see, car insurance tends to be much more expensive for younger drivers, which is mainly because young drivers typically tend to partake in riskier driving and they do not have enough experience on the roads, and statistics also show that this age group tends to have the most accidents. Because of this, insurance companies will charge more.

For even younger drivers, such as those who have just passed their test at 17, they can expect to pay as much as between £1,000 and £2,000 for cover. Confused.com recently reported that 17-year-olds paid an average of £2,051 between April and June 2020, which is why it is important to shop around for car insurance deals.

Conversely, the older and more experienced you are, the cheaper your premiums will be (except for 75+ ages), provided you have built up a no claims bonus and can prove that you are a safe driver.

Car insurance rates by gender

While companies are no longer allowed to assess customers’ premiums based on their sex, it seems that male drivers are, on average, still paying more for car insurance compared to female drivers.

In 2018, Confused.com reported that male drivers were paying an average of £878, while female drivers paid around £764 for car insurance, a difference of £114.

This may be due to the fact that men typically driver more high-performing vehicles than women, but it is also worth remembering that insurers take a lot more than just your vehicle into account, so there could be many reasons.

Why is car insurance so expensive?

The cost of car insurance is generally high because insurers need to account for the high number of claims being made on policies, in addition to your personal details. 

In order to continue making a profit, insurance providers need to rise premiums to help pay towards costly claims that occur on a daily basis, which unfortunately means that sensible drivers are being penalised for the increase in claims.

The latest figures from the ABI show that in 2018, the total number of fraudulent claims and car insurance applications that were detected was 469,000, a 3% increase from 2017, and the value of the claims had increased by 6%. Additionally, there was a shocking 1,300 car insurance scams being uncovered every day, with the average con costing around £12,000.

So the fact that there are a lot of people who take advantage of the car insurance industry is another big reason why car insurance is expensive.

Insurers also need to account for costs associated with:

  • Whiplash claims: These cost the car insurance industry around £2 billion every year, which, in turn, adds around £90 to each driver’s insurance premium.
  • Referral fees for compensation claims: The government hopes to ban this fee at some point, to help reduce the number of claims being made and consequently reduce premiums for drivers.
  • Uninsured drivers: More than 1 million drivers are illegally uninsured, which increases insurance costs as the insurance industry still needs to pay out after an accident.

Remember, it is a legal requirement and you must have a car insurance policy in place otherwise you face potential fines, points on your licence, having your car towed or even court hearings, depending on the situation. 

The police can easily detect uninsured drivers and cars on UK roads by using their ANPR technology or by using the AskMID website, so it is very unlikely that you will get away with being an uninsured driver. Either way, it will cost you in the long-run and your car insurance will be even more expensive in the future.

It is also important that you remain truthful when applying for car insurance, as lying will invalidate your policy in the event of a claim and you’ll end up having to foot the bill yourself, so it really isn’t worth the risk.

Read more: Driving Without Insurance: The Penalties

How to save money on car insurance

To keep the cost of your car insurance as low as possible, try the following tips:

  • Shop around: Avoid staying with the same insurer every year, unless they can offer you a better deal than the one you’ve found online. They won’t want to lose you as a customer, so they may offer you an incentive to stay. If not, make sure you switch providers as this is the best way to save money - new customers often get rewarded with cheaper premiums, too. Use comparison sites to do this, or compare quotes with Bobatoo today.
  • Pay annually for cover: If you pay monthly, you will be paying interest on top so you will end up paying more in the long-run. If you can’t afford to pay annually, you may be able to find a company that charges lower interest than others, but this will require some research.
  • Get the right policy and the right amount of cover: Make sure you not only get the cheapest car insurance deal, but you get the right policy for your needs. And if you only drive 5,000 miles per year, it’s not worth paying for a policy that covers 12,000, for example.
  • Increase your voluntary excess: Only do this if you can afford to pay it in the event of an accident.
  • Add a named driver: By adding an older, more sensible driver to your policy, this will bring the price down. They must not, however, drive the vehicle more than the main driver, otherwise you will be committing a crime known as car insurance fronting.

For further advice on how to save on car insurance, read our guide: 10 Tips and Tricks for Cutting the Cost of Cover

Third-party VS comprehensive cover: What policy is best?

The policy and level of cover that you require depends on your needs. Here are the 3 basic levels of car insurance:

  • Third party only insurance (TPO): This is the minimum level of cover required by UK law, but it only covers damage to the property of any third parties involved in an accident, including any injuries. This applies to passengers, people in another vehicle and pedestrians. It does not cover any damage done to your car or any injuries you may sustain.
  • Third party, fire and theft (TPFT): This provides the same cover as a TPO policy, with the added cover for fire damage to your vehicle and cover if it is stolen.
  • Fully comprehensive insurance: This is the most extensive level of insurance - as well as providing the same cover as the above policies, it also covers any damage done to your vehicle, and you are covered for any accidents that are your fault.

Learn more: What does ‘third party’ and ‘comprehensive’ car insurance actually mean?

It’s worth noting that you can add extra cover to your policy for further protection, but this depends on your personal needs and it will also increase the cost of your premiums.

While many people assume that fully comprehensive car insurance is the most expensive type of policy to buy, it was reported by Statista that third-party, fire and theft policies had higher premiums overall compared to fully comp plans. This is because young drivers typically tend to purchase TPO because it’s the cheapest, so an increase of claims made on TPO policies has caused this type of cover to increase.

At Bobatoo, we recommend purchasing fully comprehensive cover so that you’re financially protected for all situations, but you will need to determine what policy is best for you first.

The best time to get car insurance

As mentioned above, one of the best ways to save on car insurance is to compare quotes from a range of providers online.

To get the best deal on cover, you should start comparing quotes between 20 and 26 days before your renewal date (or the end date of your policy), as this could save you up to 40% on cover, as reported by MoneySavingExpert's Martin Lewis. He states that the best time to get the best deal on car insurance is 21 days prior to your existing policy end date.

If your renewal date is coming up, we recommend comparing quotes right away to see how much you could save. Get started right now by tapping the green button below, or for further information regarding motor insurance, read our related guides below.