Half of drivers say they’re paying too much for insurance given how little they’ve been driving

Half of drivers (51%) believe they are paying too much for car insurance given how little they have been driving since the pandemic, with a similar proportion (50%) unable to switch to a cheaper policy without getting charged, research for RAC Pay by Mile Insurance has found.*

With Covid-19 having heavily impacted the distances if not the frequency of trips taken by car, the survey of 2,100 drivers suggests many are starting to question whether they are being charged a fair price for their insurance – something that’s only set to get worse given more than a quarter (27%) expect to drive less in the future than they did before the pandemic.

New government data from MOT tests** also suggests a trend towards many motorists driving fewer miles a year, which began several years ago, has been dramatically exacerbated by the pandemic. Between 2017 and 2020 the number of cars driven fewer than 6,000 miles between annual MOTs rose by an estimated average of 6% a year, but in the 12 months to the end of February 2021 this accelerated by a huge 35% compared to the same period in 2020. Separate government data shows that in 2019 drivers covered 20% fewer miles than two decades ago.***

Of those motorists who feel they are now paying too much for their insurance given they are driving so much less, 50% know they would get charged if they cancelled their current policies in seek of a better deal elsewhere – highlighting the inflexibility of many conventional car insurance policies at a time when travel behaviours are changing drastically. A tiny proportion of drivers – just 3% - knew they could cancel their current policies without incurring an exit fee.

The RAC research also found that many drivers are likely to be paying more for their insurance than they need to, as half (51%) say they have driven fewer miles than they told their insurer when they bought or renewed their car insurance policy. This might well be because drivers find it hard to predict their annual mileage when asked by an insurer, something 54% of respondents agreed with.

And even before the pandemic, four-in-10 drivers (42%) were dissatisfied with how much they had been paying for car insurance in relation to the number of miles they had driven.

RAC head of insurance development Laura Truman said:

“While it remains to be seen how our driving habits change as a result of the pandemic, it seems fair to presume that many of us won’t go back to driving the sort of miles we used to – especially if a degree of home-working becomes the norm. But even without the impact of Covid-19, it’s clear the number of cars covering fewer than 6,000 miles a year has been going up in recent years.

“This shift is clearly prompting drivers to question whether the cost of their car insurance is reasonable. This might partly be because in so many cases motorists are forced to lock themselves into annual insurance contracts, the price of which is partly determined by the policyholder’s estimate of how many miles they’ll cover in a year. This is something we know drivers found difficult to estimate before the pandemic but considering all the uncertainty surrounding people’s future travel needs it must now be even harder.

“It’s this inflexibility, together with the increase in the number of lower mileage drivers, that were the triggers for creating our new Pay by Mile insurance product. We’ve turned the conventional concept of car insurance on its head – rather than basing the cost on, at best, an educated guess as to the number of miles a driver thinks they’ll do in a year, they’re simply charged for the number of miles they actually drive every month – plus a small premium to cover the time their car is parked.

“What’s more, if a driver finds themselves covering fewer miles, then their monthly premium reduces accordingly. And if they find themselves doing far more miles, they could switch to a standard annual insurance policy without incurring a cancellation fee.”