These are not good times to be a car owner. The price of petrol is rising, congestion is mounting and road taxes are widely rumoured to be set to rise post-election.
As for the cost of insurance, research from the AA shows that we are seeing a record increase in premiums, due to fraud, higher claims and the costs of having to pay for the NHS treatment of those involved in accidents. This would seem a strange time indeed for one of the UK's biggest insurers, AXA, to re-enter the car-insurance market it abandoned in 2004.
But the firm has a particular segment of the market in mind, not women or older people – who tend to have lower-than-average claim records – but experienced motorists, those with eight years or more no claims. To tempt this breed of experienced drivers, AXA, from tomorrow, is offering up to 90 per cent no-claims discount on premiums – up from the normal 60-65 per cent discount ratio offered across the industry.
"Research shows that drivers don't feel that anyone is rewarding them for their experience and their proven track record, so that's what we're focussing our attention on," says Tina Shortle, a director at AXA Insurance.
But perhaps the most impressive feature is the £1m driver-protection cover, which is an add-on for £34.99 a year. This protects against medical costs and loss of earnings related to drivers injured in an accident that is their fault. Many drivers wrongly believe that they are already covered for such costs. "They think that their car insurance covers them for this sort of thing but it doesn't. We are the first to offer such cover," Ms Shortle said.
From an insurer's point of view, the benefit of concentrating on experienced drivers is clear. AXA's research shows that they are considerably less likely to make a claim than those with less than eight years' driving under their belt. So, while 16 per cent of inexperienced drivers will have claimed for an accident that was their fault in the past year, the figure drops to just 6 per cent for experienced drivers. Similarly, inexperienced drivers are far more likely to get bumps and scrapes, and three times more likely to have driving convictions. Experienced drivers are also less likely to be fraudulent, with only 13 per cent saying they would exaggerate a claim to get more money, compared to 23 per cent of inexperienced drivers.
A high volume of personal-injury claims and increased fraud have been blamed for the sharp acceleration in car insurance premiums over the past year. In the last quarter of 2009, car cover jumped by 7 per cent to just over £1,000, the biggest increase ever, according to the AA's latest British Insurance Premium Index. Annual statistics paint a similar picture and show that premiums for comprehensive cover rose by 18.7 per cent, the largest annual increase since the index started in 1994, and there's little sign that the price hike will slow down soon.
"The year hasn't started off well for premiums, with one major insurer saying it will be substantially increasing premiums by 20 per cent. So far this month there appears to be no let up and we think that's going to continue for at least the first two quarters," says Ian Crowder, a spokesman for the AA.
So what steps can you take to minimise costs? As well as keeping an eye out for the quirkier deals, such as the new Axa offering, shopping around on comparison sites before you renew an old policy is a mantra most drivers are well aware of. But it's a good idea to go back to your current insurers once you've found yourself a better deal, to see if they will match or beat that price.
Picking the right vehicle in the first place is the easiest way to reduce insurance costs. Cars with powerful engines or soft tops will cost more to insure. And premium marques tend to be more expensive to insure because repair costs are higher.
When shopping around for a policy, always check the prices for third-party and fully comprehensive cover. It isn't always the case that the lowest level of cover is the cheapest as insurers may presume that people opting for less inclusive insurance are riskier drivers.
Increasing the excess, the minimum amount you pay should you need to claim, is a simple way to bring down premiums, but be careful not to go too far. Find a balance between what you can afford to pay each month and what you are prepared to pay should you need to make a claim.
"It is worth noting that the effect of increasing an excess on smaller, less expensive policies can be considerably less than for younger drivers, who have much higher premiums. Drivers should ensure that they don't increase their excess needlessly," says Will Thomas, the head of car insurance at comparison site Confused.com.
Improving your car's security should also help to cut premiums, although with modern cars already geared towards this the price difference may be slight. Even so, fitting your car with the latest alarm or tracking device (which will alert passing police cars if your car has been stolen) and parking it in a garage should make a difference. Also, most insurers base premiums on annual mileage, so don't overestimate this. You can contact your insurer at a later date to adjust the mileage if you're using your car more than you planned.
For younger drivers, the spiralling cost of car insurance is an even bigger problem. It can be difficult for drivers under 25 to get any car cover at all because statistics show that younger drivers are far more likely to have an accident or damage their vehicles, causing insurers to cover their backs with excessive premiums.
All is not lost, however, as there are ways to convince an insurer that you're a safer bet, including advanced driver programmes. Pass Plus courses are designed to help new drivers cope with different driving conditions, including driving at night, on windy rural roads and on motorways. These cost around £150, but could reduce annual insurance premiums by the same amount. Image-conscious drivers should avoid making modifications to vehicles as these may be deemed a safety risk.
Third party, fire and theft cover is likely to be the cheapest insurance option for a young driver, and putting an older friend or relative as a "named driver" on your policy should reduce costs even further. "If there's any chance a parent will need to borrow the car then it may be worth putting them on, but do not be tempted to make them the policyholder if you are the main driver, this is known as fronting and is considered fraud," says Mr Thomas.
Overall, simply being a careful driver can benefit both your health and your wallet; research from Confused.com found that just two accidents can double the price of your insurance. So be vigilant, always check the weather before you drive, and keep your lights on in poor conditions. Also, avoid breaking sharply, take corners at lower speeds and in flood conditions take puddles slowly, or not at all if you're unsure of the depth.Reuse content