Last week, we wrote about insurance costs for young people and how – by getting the skates on and lessons sorted – passing your test and becoming a named driver can save you anywhere between 30% and 80% on your insurance costs. But how are the rest of us drivers faring?

Consumers have been facing spiralling insurance costs since 2015, when prices increased as much as 20% in one year. There was a plethora of reasons affecting costs. With the recession making a turnaround, there were more cars on the road, meaning more claims. A change in court limits for claims meant making a claim was more expensive for insurance companies. But the over-riding reason was that the insurance industry was operating in a very unstable market, one that had to be rectified.

Premiums Still Increasing

That was 2015. But where are we now, three years later? Despite recent research from the CSO indicating that the cost of motor insurance has dropped by 12.8% in the past 12 months, many motorists are still seeing their premiums increase at the time of renewal.

A survey undertaken by AA Ireland of over 4,000 Irish motorists found that over half of respondents “strongly agreed” that they had seen a significant increase in their insurance costs at the time of their last renewal. Meanwhile, a further 23% were somewhat in agreement with the claim that they had seen their insurance costs continue to rise year-on-year.

“While we have seen a few headlines recently indicating that insurance costs are dropping, it’s important to bear in mind that this is based on an aggregate of all available data and, as a result, there are many motorists out there who have yet to see their premiums start to dip’” says Conor Faughnan, AA director of consumer affairs.

“Even worse, our research indicates that the poor response to this crisis from government has resulted in the majority of motorists still seeing the cost of their cover increase or, at best, stay at a level much higher than they would have paid in previous years.”

Keep Shopping Around

Consumers shouldn’t lose faith, though. Shopping around is still crucial and, despite the high numbers, you may be able to find a better deal – sometimes a much better deal – with another insurance company. However, from the research, people aren’t engaging in this process as much.

When asked if they had shopped around less this year than in previous years when it came to motor insurance, just under one in 10 of the motorists surveyed (9%) “strongly agreed” that this had been the case. Meanwhile, a further 17% were somewhat in agreement with the claim that they had made less of an effort to compare premiums at the time of their last renewal.

“Many people are still seeing increases in their insurance prices, but the percentage increase for most is going to be significantly less than they saw in 2015 or 2016. As a result of this, people may fall into the trap of thinking they’re getting a good deal and fail to compare providers, which could leave them paying significantly more than they need to for cover,” Faughnan added.

“Even if you are one of the fortunate people who has seen their premiums drop compared to last year, it can still be worth putting some time into shopping around as – even when the drop in costs the CSO is reporting is accounted for – the average motorist is still paying 20% to 25% more for insurance than they would have in 2015.” CL

Motor tax needs an overhaul

In other motoring news, motor tax is also an issue that is really irritating consumers, especially when it comes to high levels on older cars. Another body of research undertaken by Taxback.com found that most people believe that drivers of older cars are being unfairly punished when it comes to Ireland’s motor taxation policy, with 83% agreeing that the system should be overhauled in one way or another.

Ireland currently taxes motorists according to CO2 emissions on all cars registered after July 2008. For cars registered before this date, motor tax is calculated on the size of the engine.

The figures are certainly alarming. Let’s take Ann O’Mahony, for example. She currently has a 2007 1.2 Volkswagen Polo. Ann doesn’t do a massive amount of driving, just to the local village for her shopping and errands. She is currently paying €330 a year in tax. However, if she had the money to purchase the exact same model that was registered in 2011, it would fall into the motor tax band A2, costing significantly less, at €180 annually. That’s a difference of €150.

When you go up in terms of the power of the engine, costs are even greater. Michael Murphy was delighted when he purchased a 2007 BMW525D (3.0l diesel). He got a good deal on the car – but his motor tax now stands at €1,494. If he had opted for the 2008 model, costs would be €570, a massive difference of €924.

Low Income Penalised

Barry Flanagan, director of Taxback.com, says: “It would appear, from these simple examples that, in effect, the current tax system rewards those with higher incomes, as they can afford post-2008 cars, and penalises lower income earners.

“Almost one quarter of respondents said that they believe motor tax should be scrapped completely in favour of tax increases on fuel, so those who use their car more, pay more.

“The merits of this are not altogether difficult to see. The situation, as it stands, means that a person who commutes by public transport during the week, only uses a car on weekends and clocks just 3,000km per year, pays the exact same amount of motor tax as a person with the same car, but who uses their car seven days’ a week, covering huge distances, racking up 60,000km per year.

“Arguably this isn’t the fairest system, and an overview of the way our motor tax works is called for,” he believes.