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Savings to be made for Scottish drivers as insurance premiums drop

• Scottish motorists can now expect to pay £616 for their car insurance, as prices for new policies drop by £26 (4%) in 12 months
• More than three quarters (77%) of UK drivers who received their car insurance renewal in the past three months saw their price increase by £44, on average, according to research.
• Expert report reveals how consumers are being affected by the loyalty penalty, which has cost consumers £1.2bn, according to investigations by the Financial Conduct Authority (FCA) and Competitions and Market Authority (CMA).
• Drivers in the Central Scotland benefitted from the biggest savings, as car insurance prices dropped by £30 (4%) in the region in last 12 months.
• Motorists in Central Scotland forking out most for car insurance, with the average premium costing £649
• Drivers in Scotland are being urged to shop around as the price of buying a new car insurance policy has dropped by £26, on average – but insurers have been ramping up the cost of renewals, new research finds.

The average price of a new car insurance policy for drivers across Scotland is now £616, on average. That’s a decrease of 3% – or £20 – in the last three months, and of 4% (£26) in the last 12 months – meaning those who shopped around would’ve benefitted from this saving.

That’s according to the latest car insurance price index by Confused.com (Q3 2020), powered by Willis Towers Watson. Based on more than six million quotes per quarter, it’s the most comprehensive new business price index in the UK.

For some Scottish drivers, the savings are even greater than this. Motorists in Central Scotland in particular will have seen their car insurance price drop by £30 (4%) on average, when shopping around.

This brings the average cost in the region to £649, making it the most expensive of the four Scottish regions.

Similarly, prices in the Scottish Highlands and Islands fell by £29 (5%) year-on-year, meaning drivers in the region are now paying £594 for their car insurance, on average. It’s a similar picture for the other Scottish regions, with prices in the Scottish Borders decreasing by £27 (5%), and £14 (2%) in the East and North East.

Drivers in these regions can now expect to pay £554 and £583 for their car insurance, respectively, on average.

However, further research by Confused.com found that loyal customers aren’t seeing these savings, but instead are being penalised for their loyalty. In a Confused.com survey of 2,000 UK motorists(1), more than three quarters (77%) of those who received their car insurance renewal in the past three months (July – September 2020) saw their price increase by £44, on average.

The data comes as the Financial Conduct Authority (FCA) released its proposal to put a stop to renewal price hikes, or otherwise known as the ‘loyalty penalty’(2). According to the investigation, initiated by Citizens Advice and the Competitions and Markets Authority (CMA), this has cost consumers £1.2bn(2) when opting to automatically renew their insurance or service, as providers apply price increases after their initial term.

But now, the FCA has proposed measures which means insurers must offer renewing customers the same price as if they were a new customer. Louise O’Shea, CEO at Confused.com, warns that the new measures being proposed does not mean drivers will never get a more expensive price for their car insurance.

The proposed ruling, which is expected to come into force from July 2021, simply prohibits insurers from calculating a price based on whether the customer is a new customer or a renewal customer. But an insurer could still review the way prices are calculated at any time, which means prices for some customers could still increase year-on-year.

According to Ms O’Shea, the only way for customers to truly know if they’re getting the best price available to them is to shop around, as there’s likely to be an insurer offering a better deal. To further incentivise drivers to seek out a better deal, Confused.com is giving them the chance to save even more by guaranteeing to beat their car insurance renewal price or give them the difference plus £20(4).

Worryingly, nearly one in four (23%) UK drivers will always automatically renew with their current insurance or utility provider without checking if they can get a better price, according to Confused.com’s research.

In fact, nearly two in five (38%) know they could be getting a better deal elsewhere. And it’s these habits that have caused people to fall victim to the loyalty penalty and overpay for insurance products or other services for many years.

To explore the issue in more detail, Confused.com has created an expert report into consumer loyalty, which looks at how people are loyal to their providers, and how much this has potentially cost them.

While most drivers in Scotland have saved money on their car insurance this past quarter, some will seen some very significant savings. In particular, the cost of car insurance in the Hebrides fell by £80 (12%) since last year, while Shetland motorists are seeing the biggest quarterly price drops, worth £98 (15%), on average.

Drivers in these areas are now paying £582 and £560 for their car insurance, respectively, on average. In Central Scotland, drivers in Motherwell saw the biggest decrease in prices, and are now paying £52 (8%) less year-on-year, with the average premium costing £649. Kirkaldy in the East and North East of Scotland has seen annual decreases of £28 (5%) with the average price of car insurance in the area now £557.

Despite recent price drops, some drivers in Scotland are paying more for their car insurance than others – particularly male motorists. While quarterly savings are fairly matched between the genders, female drivers appear to be benefitting more year-on-year.

In particular, women in Central Scotland can save £33 (5%), while men in the region are only able to save £27 (4%), on average – taking the gap between the sexes to £62, with females paying £615 and males £677, on average.

It’s a similar story in the Highlands and Islands, where women can make savings of £30 (5%) since 12 months ago, paying £553, whereas men are only saving £28 (4%), paying £625 on average, bringing the gap to £72.

While in the East and North East, women are looking at savings of £17 (3%), whereas men can save £13 (2%) since the previous year – making the gap £61, with women paying £548 and men paying £609, on average.

Perhaps unsurprisingly, it’s younger drivers who are faced with the steepest car insurance costs, despite price drops in the region. In particular, male drivers aged 17-20 in all four regions are paying the most. In Central Scotland, motorists of this age can now expect to pay an eye-watering £2,022 for their car insurance, on average, despite premium costs dropping by £103 (5%) since three months ago. In comparison, younger female drivers in the same area now pay £1,475, on average.

These price drops are reflected across the rest of the UK, where motorists can now expect to pay £765 for their car insurance, as prices for new policies drop by £18 (2%) in 12 months, on average.

And shopping around in the next few months could result in great savings for drivers. At the end of 2019 (Q4), the average price of car insurance accelerated from £783 to £815 (£32, 4%) in the space of three months – one of the steepest quarterly price increases in more than two years.

This means drivers who bought their car insurance between October and December last year were paying some of the highest prices seen in two years. But, even if prices remained flat between now and the end of the year, buying a new policy in the next three months could result in a saving of £50, on average.

This is the second consecutive quarter where car insurance prices have fallen year-on-year, which coincides with the start of the UK lockdown in late-March.

Since then, circumstances have changed for millions of drivers across the UK, with nearly half (48%) claiming to have used their car less since the lockdown began.

And according to Confused.com data, the average annual mileage travelled has dropped by 4% between those who bought their car in the past three months, compared to the beginning of the year. This equates to millions fewer miles being driven per year. And it is this drop in traffic levels, and consequently risks of accidents, which is perhaps one reason for why the cost of car insurance has dropped over the last six months.

Lockdown also saw a huge surge in the number of people applying for a SORN, and new car sales plummeted, meaning insurers had to compete and adjust their pricing in order to attract the small number of drivers who were looking for insurance during this period.

However, while the UK is facing further lockdown restrictions, some sense of normality has resumed for some drivers, as people return to work and start to drive their car more often, and new car sales have also started to pick up gradually. It’s likely that car insurance costs will return to the upwards trend we saw before the coronavirus pandemic, but at what pace remains to be seen.

While the cost of car insurance is cheaper now for most drivers, it’s clear not everyone is off the hook, which proves the importance of shopping around to find the best deal.

Louise O’Shea, CEO at Confused.com, says: “The FCA announcing measures to stop insurers pricing renewing customers unfairly was bound to come as good news to drivers.

“For too long, people have been penalised for staying loyal, and that shouldn’t be the case. However, it’s so important to understand that this doesn’t mean they’re getting the best price available to them in the market.”