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April 2022New Pricing Regulations Are Pushing up Older Drivers’ Insurance Premiums
New regulations that prohibit insurers from offering cheaper rates to new customers are pushing up average car insurance premiums, with motorists over 50 seeing the steepest rises, Consumer Intelligence has revealed.
The Financial Conduct Authority (FCA) introduced the changes on 1 January after a review of the car and home insurance markets found that insurers were regularly increasing premiums for renewing customers year on year, a practice called “price walking.”
The City regulator argued that not only was price walking leading to higher premiums for loyal customers—a penalty estimated at £1.2 billion per year—it was also distorting the entire insurance market. Insurers reeled in new customers with below-cost prices, intending to recoup their costs by charging them higher premiums later.
With insurers now required to offer new and renewing customers the same prices, customers will save £4.2 billion over the next decade, the FCA said. However, market watchers have warned that insurers may withdraw their most competitive rates, leading to higher insurance costs for customers who proactively seek out deals.
Those predictions seem to have come to pass, with average motor insurance premiums rising 4.3% since the beginning of 2022, according to data from Consumer Intelligence. Average motor insurance premiums now stand at £697 per year.
Drivers over 50, who traditionally see the cheapest premiums, faced the steepest rise in costs, with car insurance premiums up 6.2% across the three months to £370.
But the youngest drivers, who face the highest premiums, saw their costs fall by 2.3% to £1,717. Drivers between 25 and 49 saw increases of 4.1%, taking their average premiums to £610.
However, these hikes almost entirely took effect in January, when the rule changes came into effect. “This shows that most insurers made a one-off step change to new business premiums to ensure they are compliant with the new pricing rules,” said Consumer Intelligence’s Harriet Devonald.
But drivers can expect their insurance premiums to continue to rise throughout 2022 as a result of inflation. “Over the longer-term, we anticipate general inflation in prices in 2022, with underlying pricing pressures remaining broadly upward,” Devonald said.
Drivers searching for the cheapest rates may now have to turn to telematics policies, which reward safe drivers with lower premiums. As much as 30% of the five cheapest quotes available to motorists are black box policies, the highest figure recorded, Consumer intelligence found. The research firm says the pandemic may have played a role in the new popularity of the policies as consumer needs and driving habits shifted.
Meanwhile, motorists continue to see vastly different insurance costs depending on where they live. While drivers in London pay an average of £1,216 for their motor cover, it falls to £416 for drivers in Scotland. Motorists in the South West of England and Wales have seen their car insurance premiums rise the fastest in 2022, by 6.6% and 6.2%, respectively.