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Car insurance customers would have saved £292 over the year as motorists were left to pay for extra miles they did not use due to two national lockdowns. The analysis from Finder has revealed that the average annual policy for 2020 stood at £800 compared to just £508 for those on a pay-as-you-go agreement.
Those on traditional insurance would have paid 16pence for each mile covered compared to just 12p for pay-as-you-go cover.
Finder claims that some drivers could have saved up to £780 over the year once other factors were taken into account.
A 25-year-old driver based in London would be expected to pay a massive £1,628 a year on an annual contract compared to just £845 for a pay-as-you-go agreement.
This would equate to a massive £783 saving or a 48 percent discount on traditional agreements.
Danny Butler, Insurance Publisher at Finder.com said pay-as-you-g cover has “surged in popularity” under the coronavirus pandemic.
He said that individual circumstances “played a huge role” and warned that it wasn’t “always the vase” that drivers would make savings on pay-as-you-go agreements.
He said: “Usage-based car insurance has surged in popularity throughout the course of the year, with customers looking to cut costs wherever they can during a time of economic uncertainty.
“The cost savings from a pay-as-you-go policy might seem like a no-brainer in the current times, but as this research has shown, this isn’t always the case for everyone.
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“Individual circumstances such as your age, location and driving history play a huge role in determining your overall premium.
Finder warns that for some drivers it would be cheaper to get a traditional policy than a unique pay-as-you-go agreement.
The cheapest person to insure would be a 60-year-old living in Scotland who has no claims over 20 years.
In this scenario, drivers would pay just £204 per year compared to £305 on a pay-as-you-go policy.
But over 150 quotes, pay-as-you-go agreements would still work out around 31 percent cheaper on average,
Mr Butler adds that drivers considering making a switch should get several quotes based on their personal circumstances.
He said: “As a starting point, I’d recommend assessing how many miles you expect to drive in the next 12 months.
“You should then get several quotes to assess the impact of your own personal demographics on both a PAYG policy and a traditional policy.”
Pay-by-mile car insurance provider By Miles has previously warned that 19.3 million drivers have been overcharged on their policies.
They found that on average, low mileage drivers who use under 7,000 miles were paying around £180 more for cover that figure each year.
James Blackham, co-founder of the firm said the price difference showed the “unfairness of traditional car insurance” and demanded companies to “stop inflating premiums”
He said: At a time when drivers are completing fewer miles during the lockdown, the unfairness of the traditional car insurance pricing structure is clear to see. If you drive less, you should pay less.
“It’s a fact that lower mileage drivers are less likely to claim, so there is no logical reason for the higher charges they’re facing.
“Insurers must stop inflating premiums for lower mileage drivers to subsidise the higher claims costs of higher mileage motorists and start actively rewarding people for driving less.”
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