THE LIFETIME COST OF INSURANCE : Recent increases in car insurance prices, especially for younger drivers, have been well documented. The AA's British Insurance Premium Index estimated that rates for fully comprehensive cover increased by an average of 33% in 2010, with 17-22 year old drivers facing increases of over 50%.
Research undertaken by Tiger.co.uk, the car insurance comparison site, has provided a longer-term, macro view of the costs of car insurance. They based their calculations on a series of average driving statistics such as age of car, number of convictions and insurance claims, marriage and parenthood. The results are quite startling. They have estimated that an average driver in the UK, driving from the age of 19 to 85 and driving a relatively small car like a VW Polo or Ford Focus, will spend just over £28,000 on car insurance in their lifetime at today's prices. In some postcodes deemed by insurers to be higher risk areas, this figure could be double.
Taking average earnings data from the Office of National Statistics indicating that the average gross UK salary in 2010 was £26,510, this means that after tax and national insurance deductions, an average driver will have to work for approximately 17 months of their life just to pay for their car insurance!
Tiger.co.uk estimated that women will have to work even harder. Although based on current rates women will spend about 9% less than men over their lifetime to buy the same level of cover, their lower average salaries result in them having to work for about 21 months to pay for their policies.
And what happens if inflation is taken into account? If the present rate of inflation based on the Retail Price Index (RPI) of 5.1% is applied, then the lifetime spend on car insurance rockets to an eye-watering £170,624.
In their study, Tiger.co.uk also looked at an extreme scenario where they applied the 2010 car insurance increases of 33% across the next 67 years for the fictitious motorist, amazingly they discovered that the poor driver would have to find an incredible £185 BILLION just to keep their modest car insured for that period!
A spokesperson for Tiger.co.uk commented: “Whilst we are certainly not forecasting sustained increases like those seen in 2010, car insurance is getting more expensive for most drivers. Our research intended to highlight this, but also tried to make light of the inflation we saw last year as we hope it won't be repeated. As always, we recommend that all drivers use sites like Tiger.co.uk to compare prices from hundreds of insurance brands in order to find cheap car insurance quotes to help reduce the cost of motoring”.
Sources: AA, ONS and Tiger.co.uk. Assumptions for insurance costs include fully comprehensive cover; IP1 postcode; 10,000 miles per year; £250 voluntary excess; driving lifetime of 67 years; and children added to policy for a 6 year period.
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