The past three months have seen the cost of car insurance U-turn in London. New data reveals that prices dropped as much as 70 over the quarter on average, as the coronavirus pandemic forced drivers to stay home.

Most drivers in London can now expect to pay more than 1,000 for their car insurance, on average, despite prices falling in the past three months. That’s according to the latest car insurance price index by Confused.com (Q2 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.

In particular, Inner London is revealed to be the most expensive region in the UK for car insurance, with motorists paying 1,202 – a whopping 70 (6%) drop in three months, and 12 (1%) year-on-year.

Meanwhile, a fall in prices in Outer London means drivers are now paying less than 1,000 for their car insurance for the first time in more than six months. The average cost of car insurance in the region dropped by 51 (5%) in three months to 971, which is also 10 (1%) cheaper than the price this time last year.

For both regions, this is the steepest quarterly drop in prices in more than two years, and the first time prices have decreased year-on-year in more than a year.

According to the data, prices have dropped across all London postcodes over the last three months. However, drivers in the regions are still facing staggering car insurance costs, with paying nearly 1,400. In East London, motorists now pay an eye-watering 1,374 for their car insurance, despite a 91 (6%) fall in prices in the past three months. This makes it the most expensive postcode in the UK for car insurance.

Meanwhile, drivers in Ilford pay the most outside of Inner London, with the average car insurance cost in the area now 1,252. This is 60 (5%) cheaper than three months ago. However Ilford is among the few areas in the UK where prices have increased year-on-year, with prices now 11 (1%) more expensive than 12 months ago.

Car insurance is something that can cost people a lot of money, in spite of having websites (see MyMoneyComparison for example) to compare various prices in order to get the best possible deal. So it is understandable that the news of cheaper car insurance costs may come as a relief to many motorists, as the coronavirus pandemic forces people into financially difficult conditions. But Louise O’Shea, CEO at Confused.com urges drivers to shop around, as research shows those renewing with their current insurer are not seeing the same savings, despite being encouraged to stay home. In fact, a nationally representative survey of UK drivers (1) reveals that those who did shop around using a price comparison site and switched insurers were able to save £61 on the cost of the insurance, on average.

This proves that it’s crucial for drivers to be taking the time to check their renewal document and compare with the previous year’s price. And even if prices are similar, or have dropped slightly, then there is still the opportunity to save money. 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 (3).

It’s a similar picture across the rest of the UK, with most other regions facing cost savings year-on-year. Overall, the average UK premium now stands at 770, following a 19 (2%) decrease since 12 months ago. Savings are even more significant across the quarter, as prices drop by 39 (5%) in the past three months, on average.

According to the data, this puts an end to more than two years of annual price increases. This could be due to a change in circumstances for many people, due to the Coronavirus crisis. As millions of people have been spending more time at home, half (50%) of UK motorists have reduced annual mileage as they have been using their car less during lockdown, meaning there’s less traffic on UK roads. As a result, this reduces the risk of accidents, and therefore minimises claim pay-outs for insurers. Similarly, between March and June, 1.3 million people applied for a SORN(4), and new car sales plummeted (5), which could’ve resulted in a loss of business for many insurers, putting them under pressure to adapt their pricing to the situation.

However, as the UK government gradually eases restrictions, it’s expected people will be driving more often, although they might be feeling slightly out of practice, and car sales will start to increase. It’s likely car insurance costs will return to the upwards trend seen before the coronavirus pandemic, but at what pace remains to be seen. If drivers do notice their car insurance costs starting to creep up, then there are ways to bring their price down. Although, it can be easy for drivers to feel overwhelmed about how to make the best financial decisions under the circumstances. According to Confused.com’s expert guide, there are several things drivers can do to reduce the price they pay for car insurance.

For example, drivers can cut back on their cost by paying annually where they can. While paying monthly is more convenient, it’s like taking out a small loan, which will usually carry interest on top of the initial price. And according to Confused.com data this can cost as much as 16% more than the annual price(4).

Despite recent price drops, some drivers are facing more expensive car insurance costs than others – particularly male motorists. The average UK cost of car insurance for men is now 810, following a 37 (4%) fall in prices over the past three months, and 17 (2%) year-on-year. However, female drivers benefitted from greater price reductions, with costs for women dropping by 43 (6%) over the quarter and 22 (3%) over the year. This means female drivers are now paying 719, bringing the gap between men and women to 91, on average. This is the biggest price gap between the two in over a year(2).

It’s a similar picture for different age groups, as most drivers benefit from cheaper prices this quarter. In fact, some younger drivers will see the biggest difference in prices, perhaps as there are fewer ‘new’ drivers on the road due to the tests being cancelled, as typically new drivers will face the most expensive premiums. In particular, the average cost of car insurance for 21-year-olds is now 118 (7%) cheaper than three months ago and 114 (7%) less year-on-year. However, drivers of this age are still paying a staggering 1,525 for their insurance, on average. Similarly, 19- and 20-year olds saw a steep drop in prices. Car insurance for 20-year-olds now sits at 1,730, following an 88 (5%) quarterly price drop, while 19-year-olds pay 1,917, which is 66 (3%) cheaper than three months ago, on average.

Having said all that, there are also some age groups where prices have increased for drivers. For example, the average price of car insurance for 66-year-olds is now 19 (4%) more expensive than it was 12 months ago, costing 453.

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.

However, there’s more good news for drivers as other motoring costs appear cheaper now than this time last year. In fact, the average price of fuel has dropped as low as 110p in July, on average. According to Confused.com’s fuel price index(7), motorists are now paying 110p for a litre of petrol, compared to 129p in August last year. Diesel has also dropped to 116p from 132p over the same period, on average.