Car insurance premiums saw record fall in 2024 - with young drivers enjoying biggest cuts

By ANGHARAD CARRICK, BUSINESS NEWS EDITOR

Updated: 09:48 EDT, 8 January 2025

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Car insurance prices dropped a record amount at the end of 2024 as competition in the industry started to heat up again, according to new data.

Pearson Ham Group’s latest General Insurance Price Index shows that car insurance premiums fell 5.5 per cent during the fourth quarter of 2024, bringing the total reduction in the second half of the year to -10 per cent.

Prices have dropped consistently every month since April, with a total reduction of 16 per cent in prices for drivers across 2024, down from a peak of 46 per cent higher towards the end of 2023.

Despite the reductions, prices remain 21.4 per cent higher than at the start of 2020.

Drivers have seen significant increases in their insurance costs in recent years, as persistently high inflation saw the cost of car parts and labour soar.

Now it seems the market has reached a turning point with premiums starting to reach more manageable levels.

Car insurance premiums dropped significantly over the course of 2024

The index shows younger drivers experienced the largest year-on-year reductions, with premiums for under-30s plummeting by almost 17 per cent over the year.

Drivers aged between 50 and 60 followed closely behind, falling by 16 per cent, while reductions for drivers over 60 averaged below 14 per cent.

The smallest decreases came for drivers over 70, whose insurance premiums dropped by 13.4 per cent.

The fall in prices has largely been driven by increased competition in the industry, as some insurers opted to make more aggressive cuts in the second half of the year.

Stephen Kennedy, director at Pearson Ham Group, said: 'This deflation offers much-needed relief for many policyholders, particularly younger drivers who faced some of the steepest increases in previous years.'

Elsewhere, home insurance premiums saw more modest reductions, with quoted prices falling 1.7 per cent in the fourth quarter.

Most of the fall came in December, which saw a 1.3 per cent fall, marking the biggest drop since May 2022.

Despite the downward trend, prices remain nearly 12 per cent higher than a year ago and over two years, premiums have risen by 56 per cent.

This is largely due to challenging claims costs and frequency, says Pearson Ham Group, although insurers are likely to move away from steep price increases in the coming months.

Frances Luery, Product Manager at Pearson Ham Group, said: ‘The decline in home insurance prices during Q4 indicates a welcome shift in the market after prolonged periods of sharp inflation.

'While premiums remain significantly higher than two years ago, this recent stabilisation is a sign of things to come this year.’

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