The average price of car insurance policies in 2021 fell to its lowest level in six years, according to the Association of British Insurers (ABI) Motor Insurance Premium Tracker.
The tracker, which looks at the price consumers pay for their cover, did reveal evidence that sustained cost pressures are beginning to affect the cost of car insurance cover.
In 2021, drivers paid an average price of £434 for their car insurance, a fall of 7% on 2020 to its lowest level since 2015.
There was a slight rise in the average premium paid in Q4 2021, by £11 to £440, on the previous quarter, but the price was still 3% lower than the same quarter of 2020.
The rise in the average premium paid in Q4 2021 highlights that continued cost pressures on insurers could be starting to filter through into the cost of cover, the ABI said.
Between 2015 and 2020, the average amount paid for damage to vehicles increased by 59% and the average paid to third parties for damage to their vehicles rose by 32%.
In addition, supply chain issues that are affecting other sectors are causing some delays in accessing some replacement parts.
Claims are expected to rise with road traffic returning to pre-lockdown levels, putting further pressure on costs, while the Financial Conduct Authority (FCA) changes to the pricing of motor and home insurance could lead to some consumers paying higher prices if they currently benefit from significant new business discounts.
Commenting on the trends revealed by the tracker, Laura Hughes, manager of general insurance at the ABI, said: “While we expect the motor insurance market to remain highly competitive in 2022, rising costs for parts, repairs and other supplies and services will continue to put pressure on premiums for motor insurance for both new and existing customers.”
“Insurers appreciate that many households are facing a cost-of-living squeeze with rising household bills as costs rise in other areas of the economy, and they will be doing all they can to ensure competitively priced motor insurance, in the face of the variety of cost pressures faced.”
“While the FCA pricing rule changes may well lead to fewer introductory discounts, it should still pay to shop around for the best deal for your needs.”