Auto insurers making £1.5bn from drivers who pay monthly

Study of 24 million car insurance quotes reveals almost half of drivers are paying more for this reason

Insurance News

By Lucy Hook

Drivers who pay for their car insurance policies monthly are paying an extra £73 a year compared to those that pay annually – meaning auto insurers are bringing in an extra £1.5bn per year.

A new study from MoneySuperMarket reveals that 45.5% of drivers opt to pay for their car insurance policy on a monthly basis rather than paying the full yearly sum up front – and end up paying 13.3% more than their counterparts.

The study, which analysed 24 million car insurance quotes, found that the proportion of drivers choosing to pay monthly has increased year-on-year – attributing the rise to the increasing cost of car insurance.

The average cost of a yearly premium for a driver who pays annually is £549, compared to £622 for those who pay monthly.

And the rewards for drivers who pay annually has increased year-on-year – in 2015, customers paying yearly knocked £62 off their premiums – equating to a £9 potential increase in savings this year.

As auto premiums rise – up 14% since last year and a hefty 28% since 2014 – it’s younger drivers aged 25-29 that have been hit the hardest, with premiums for this group increasing by 21% since 2015.

Regionally, the biggest price hikes were seen in St Albans at 21%, Harrow at 20%, and Southall, North London and Sutton all at 19%, with Aberdeen lucking out at just a 7% increase.

Kevin Pratt, consumer affairs expert at MoneySuperMarket, warned drivers that insurers would charge them to take the monthly instalment route.

“We’re talking about not-so-thrilling instalments. Paying for your car insurance in one lump sum is a big ask, given that average premiums are well north of £500, so it’s no wonder that millions of people opt to pay monthly. But insurance companies effectively charge interest when you take that route, typically slapping another £73 onto the cost – so if you can avoid instalments, you’ll save money in the long run,” he said.

He also added that consumers should shop the competition to find the best rates: “With premiums rising year-on-year it’s worth shopping around for a cheaper deal – there are savings of up to £2474 to be made by switching suppliers on renewal, so it’s worth checking.”

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