It follows that while auto insurance costs have risen across the board, older motorists are paying increasingly higher premiums, while younger drivers are paying proportionally less.
According to the Association of British Insurers (ABI), the average price paid for car insurance increased by 8% in the fourth quarter of last year. The ABI’s latest car insurance premium tracker revealed that motorists have been hit by a succession of sustained cost pressures.
Energy inflation added an average of over £70 to each repair. Average paint and material costs increased by almost 16%. About 40% of all repairs are affected by parts delays or shortages. The average cost of courtesy cars for repairers has increased by around 30%. And the average price of used cars has increased by 19% in the year ending in 2022.
The Financial Conduct Authority (FCA) introduced new rules on car and home insurance pricing last year. These ensure that the price paid by existing customers renewing their auto and home insurance is no higher than the price charged to a new customer for an equivalent policy, assuming it is purchased through the same distribution channel, as a broker or a price comparator.
However, the FCA rules do not set or cap the premiums paid by new or existing customers. The price of cover will continue to reflect a range of factors, including the cost of claims settlement and, importantly, the age of drivers.
Unsurprisingly, motorists are aging as the population ages. Once drivers reach the age of 70, statistics show that they are much more likely to have accidents. The risk of this happening explains the gradual increase in average car insurance premiums.
The increase in the number of older drivers on the road is also determined by social factors. For example, as public transport has suffered from budget cuts, there are fewer buses available, especially in rural areas.
“Older drivers also tend to be less adept at using price comparison websites that can identify lower prices and reduce spending,” says Ken Carter of personal finance website Moneymapp. .com.
Mr Carter says Moneymapp has made it easier to find cheaper car insurance.
“At any time, website users who, incidentally, do not need to provide details of everything from their mother’s maiden name to their inner leg measurement to use Moneymapp.com, can just click the ‘get a quote’ button,” he adds.
“There are also ways older motorists can counter rising insurance premiums. These can come in handy when you consider that the average price paid to renew an existing motor insurance policy in the fourth quarter of 2022 has risen by £31 to £428, an increase of 8%.
“For example, when you are prompted to complete an insurer’s application form online, it makes more sense to list your occupation as ‘retired’ or ‘retired’ rather than ‘unemployed’, because applicants listed as unemployed people tend to be charged higher premiums.
“Adding an adult daughter or son to an insurance policy will also reduce the premium charged, although this does not apply to additional drivers in their early 20s,” Carter says.
Unfortunately, there’s no denying that as costs to providers and insurance companies have risen, even older motorists with clean driving records can expect to see their auto insurance costs rise.
Nevertheless, car insurance is an expense that can be reduced by judicious use of price comparison sites, although older drivers may decide to get help from younger family members!
For more financial advice, check out Peter Sharkey’s regular blog, The Week In Numbers.
This column is for general information only and should not be considered financial advice for individuals. Consult your professional advisor.