For the first time in a long while car insurance premiums paid by the UK's long-suffering motorists are no longer rising. In fact, if you insure your car comprehensively you can probably expect to see a small reduction in your premium when you next renew - assuming that you haven't made a claim or been zapped by a speed camera during the past year.
In the past few weeks, three different organisations have all produced figures showing that car insurance premiums have peaked and in some cases are actually falling. The AA recently published its insurance index showing that the average comprehensive insurance premium fell 3% to £753 last year. Over the same period, the average quotation for third party, fire and theft (TPF&T) cover rose just £2 to £904.
Neale Phillips, director of AA Insurance, says it is particularly good news for comprehensively insured car owners who suffered sharply rising premiums from 1996 until around Christmas 2003.
"Non-comprehensive cover is mainly chosen by young drivers who represent the highest risk for insurers - I believe this small upward trend reflects the increasing cost of meeting third-party claims. However, insurers appear to be refining the way they calculate premiums. This is leading to the reductions in premiums we are now seeing despite rising claims costs," he said
It is a similar, if slightly contradictory, story over at Insuresupermarket.com. It has totted up the insurance premiums it has provided over the past 12 months and reckons they rose, on average, just under a quarter (23%) to £469 - but it said, "quotes have been falling since May". The difference in prices probably reflects the two organisation's different client bases.
One area in which price falls will be particularly welcome is to cover young drivers. Quoteline Direct has just surveyed 100,000 personal car insurance customers and found that drivers aged between 17 and 24 have saved the most.
It estimates the average premium for a driver aged between 17 and 24 in August 2004 was £682 - £49 less than in August last year. Its figures for the past three months again show a steady decline in the cost of premiums. Over the past five years, young drivers have seen the largest increase in premiums of any group of drivers.
So, what's driving these falls given that we are constantly being told that the cost of claims is rising?
Insuresupermarket's director Richard Mason puts the price falls down to the number of recent entrants into the market which has increased competition.
It's certainly become a more crowded market over the past few months. In the summer the Post Office launched its own insurance scheme that was provided by low-cost provider, Budget. And it has been joined by the Bradford & Bingley, Nationwide and, this week, the supermarket chain Asda.
Nationwide has embarked on a high-profile poster campaign proclaiming that it will refund any customer who takes out a policy and then discovers a cheaper quote elsewhere, which given the level of competition, looks a brave policy.
To test some of the new entrants against the better-known existing providers, we asked them all to provide two quotes for two young drivers.
Although by no means indicative of the overall insurance market, our mini survey does highlight the need to shop around for quotes.
It's worth remembering that different insurers target different groups of drivers. Some will decide they don't want to insure young men, and will quote accordingly.
Interestingly, Insuresupermarket.com also revealed which companies it thinks are coming up with the cheapest quotes. Tesco, which was number one a year ago has dropped to number five. It says the company currently offering the best deals is Budget - although this does not cover the entire market.
Looking as past figures, it would be easy to conclude that new entrants often offer good deals at the start. They then raise premiums in the second year in the hope they will be able to retain customers too lazy to switch.
One problem we found was that it is very difficult to make like-for-like comparisons using car insurer's websites. It most cases it was unclear what excess would be payable - particularly as most companies impose a minimum excess for young drivers.
Lastly, consumers should also look closely at the cost of financing insurance. Insuresupermarket has also highlighted the huge difference in the interest rates charged to customers who spread the cost of the premium over the year.
More Than is the best in this respect despite charging a hefty 13.7% - Lloyds TSB comes out the worse charging an unbelievable 23.7%. The message appears to be: pay it off in one go, and borrow the money elsewhere, if required.
How to get those premiums down
When we asked for insurance quotes for an 18-year-old, we found companies that ask for an annual premium of more than £5,000 - even on a car worth just £3,000.
We asked for two sets of quotes - one for an 18-year- old, and one for a 24-year- old. We said they live in South London and drive quite a sporty car - a Peugeot 206 with a 1600cc engine which is worth around £3,000. The 24-year-old had a three-years no claims bonus, the 18-year old had just passed his test.
In both cases most companies imposed a compulsory excess - up to £400 for the 18-year-old and £150-£300 for the 24-year-old. For our 24-year-olds, Churchill offered the lowest comprehensive quote of £550 - the highest was Endsleigh at £838. New entrant Nationwide came out as the next cheapest. Other new firm Asda was the second most expensive for comprehensive cover, but was much more competitive for third party fire and theft (TPF&T).
Admiral topped the table with an eye-watering quote of £5,119 for comprehensive cover - narrowly beating Asda and Bradford to the uncoveted top spot. Churchill narrowly undercut Tesco to offer the cheapest quote - £2,667.
The more likely scenario of TPF&T also threw up some crazy prices. Endsleigh was the cheapest by some margin at £1,968 -some £432 cheaper than the next firm Direct Line.
Before you start panicking, there are ways to get that premium down. The most important factor is the choice of car.
Young drivers have to stick to cars in the lowest insurance category (group A or B) such as a Vauxhall Corsa or Ford Ka, and buy a low value car.
The installation of an industry-improved immobiliser will help, and don't modify the car in any way by adding things like alloy wheels.
Try an advanced driving course called Pass Plus which involves taking six extra hour-long lessons comprising a range of driving conditions. Details at passplus.org.uk
Most insurance companies recognise this scheme and offer discounted rates (sometimes the equivalent of one year's no claims bonus) to those who have completed it. Well worth the £120 to £150 the course typically costs.
When applying for insurance try putting the new driver's mother on the policy as a named driver, as this can bring the premium down considerably.
Lastly, consider buying new. This is not as mad as it sounds as some manufacturers offer free insurance with some models. It can be cheaper to take the hit in depreciation than to pay the first year's insurance.
