Car insurance price fall short-lived, says comparison website

Car insurance premiums have dipped for the first time in more than three years, but the respite for drivers will be short-lived, analysis suggests.

Prices fell by 1%, or £9, in the third quarter of the year compared with the previous three months, according to price comparison website Confused.com.

It said the most competitive premiums saw drivers paying an average of £838 a year for comprehensive cover.

Early indications suggested that prices were starting to rise again, it said.

The typical premium was much higher than the £737 drivers were paying for comprehensive car insurance a year ago.

"Worryingly, there is every possibility that car insurance prices will be the most expensive on record during the first half of next year," said Amanda Stretton, motoring editor at Confused.com.

• How to get the cheapest car insurance

• Insurers' victory in battle over payouts

The recent fall was the result of alterations made by insurers following their partial victory in a battle over how personal injury payouts are calculated.

In March, the government introduced a new formula for calculating compensation payments for those who suffer long-term injuries, which insurers said would raise their costs and, in turn, premiums.

Following consultation by the Ministry of Justice and the Scottish government, new draft legislation was published in September that would change the way the so-called discount rate is calculated.

Instalments

Separate research suggested that some drivers were facing consistently higher costs owing to the way they paid for insurance.

Another comparison website, GoCompare, found that one "typical" annual car insurance premium of £498 turned into a total cost of £597 when paid monthly.

It suggested that 38% of drivers paid for their car insurance by monthly instalments,

Georgie Frost, head of consumer affairs at GoCompare, said: "When you pay monthly, you are not really paying for your insurance, you are paying back a loan that comes with interest charges.

"Not only will you pay more because of that credit, but our research shows that you are less likely to switch in future if you pay monthly, and that could end up costing you even more each year."