Is the only way up when it comes to motor insurance premiums? Possibly, according to research from GlobalData below. That said, switching providers and shopping around does not alter some of the fundamental factors at play in the UK market; overcrowded roads at weekends, new ULEZ/CAZ zones in urban areas, which tend to bottleneck traffic and build driver frustrations, plus the increasing complexity of hybrid and EV vehicles.
Some electric SUVs weight over three tonnes, which makes recovery and storage more costly, there is no escaping that relaity by shopping around on comparison sites. ADAS cars cost more in time and money to repair and handover to the policyholder too – those costs have to be factored into premiums.
Parts supply chain problems, plus supply of replacement vehicles when cars are written off, is another rising cost which is caused partially by conflicts like Ukraine, political tensions in China/Taiwan, plus the concerted drive to reduce industrial manufacturing within Europe and North America by green activists and their sponsored politicians. If you eradicate local parts manufacturing then you are wholly dependent upon suppliers 8,000 miles away. In the end, that costs you more.
Equally, the anti-car policies being enacted by Westminster, regional and local governments will inevitably lead to more dangerous roads. People will take risks to avoid surveillance cameras, illegal short cuts and parking increases as spaces for cars and vans are reduced, or replaced by cycle lanes. Crumbling infrastruture poses multiple hazards, especially in wet weather; for example Wales has announced it will apply green tests to any new road, or maintenance project and they plan to build just 15 new roads, out of an original plan involving 59 new road schemes.
For what it’s worth here’s the word from GlobalData, which identifies the old switcheroo argument beloved of Martin Lewis.
The UK motor insurance market has witnessed a significant rise in premiums, with a 20% increase year on year till April 2023, according to a poll by One Poll for Confused.com, causing considerable concern among consumers. Low switching rates among customers is one of the contributing factors to the sharp premium hikes. Against this backdrop, there is a need for consumers to switch insurers regularly to combat rising costs, says GlobalData, a leading data and analytics company.
GlobalData’s 2022 UK Insurance Consumer Survey found that only 28.8% of motor insurance customers switched insurer at renewal (down from 30.7% in 2021). This was despite a further 46.6% shopping around but staying with the same provider. The survey also found that 68.5% of consumers visited a price comparison site to review prices before renewal.
Ben Carey-Evans, Senior Insurance Analyst at GlobalData, comments: “This might be because customers were seeing increases in premiums regardless of who they chose. The Financial Conduct Authority pricing reforms introduced in January 2022 made it harder for insurers to undercut each other by banning offering better deals to new customers than those received by renewing customers.”
As premiums were increasing throughout the year, consumers may have found cheaper options than their existing provider was offering, but they still would have been more expensive than their previous annual premium, which makes switching less appealing.
Carey-Evans continues: “An average increase of 20% in annual premiums is considerably higher than inflation and will stretch consumers who are already struggling. While motor insurance is mandatory for drivers, this trend could force individuals to look to alternative options. Pay-per-mile insurance is a way for consumers to save money on their premiums if they do not drive great distances.”
The Royal Automobile Club (RAC) says such policies offer value for consumers driving under 6,000 miles a year, while By Miles puts this figure at under 7,000 miles per year.
GlobalData’s 2022 UK Insurance Consumer Survey found that only 3.5% of consumers had an active pay-as-you-go or usage-based motor insurance policy in 2022, but sharp premium increases could push customers towards more innovative and cost-cutting policies.
Carey-Evans concludes: “Overall, this is more bad news for consumers, who continue to be hit by high inflation. Value is the key factor in purchasing motor insurance, which is already a grudge purchase, and a lack of perceived value over the past year has reduced the level of switching. However, consumers can still make some savings by switching, even if it results in an annual increase in premiums. Otherwise, consumers should look towards slimmed down policies such as pay-as-you-drive for increased value.”
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