Why has car insurance gone up?

Spoiler alert: Inflation strikes again.

Approaching your latest motor insurance renewal and wondering, “Why has car insurance gone up again?” We understand it’s frustrating, and we’re here to shed some light on the situation. 

The short answer is that car insurance prices have risen mainly due to soaring inflation and growing claims costs. However, insurers are also increasing their premiums due to a variety of other external factors, including severe weather conditions, rising car theft rates, and issues affecting the global supply chain. 

In this article, we’ll explore the average cost of car insurance in the UK, why the factors above are causing prices to skyrocket, and share some ways you can try to bring them back down. 

What’s the average car insurance cost in the UK?

According to recent figures released by the Association of British Insurers (ABI), the average price paid for private motor insurance was £627 between 1 October and 31 December 2023).

So, how much has car insurance increased in the UK?

The same ABI report found that motor insurance costs were up 12% on the previous quarter (Q4 vs. Q3 2023). This means car insurance was 25% more expensive on average across the whole of 2023 compared to 2022.

Why has car insurance gone up so much? 

There are several reasons why car insurance costs have increased recently:

1. More cars = more claims

During the pandemic, many of us were asked to work from home. As a result, there were fewer motorists on the road, which meant fewer accidents, fewer claims, and lower insurance costs.

Today, the opposite is true. Post-pandemic, there are more cars on the road, which means more accidents and more claims. Many insurers have had to increase their costs to account for this.

2. It costs more to repair cars

Like just about everything else these days, inflation has affected the cost of repairing your car. Inflation measures how much more expensive a set of goods and services has become over a certain period — usually a year. 

This means hiring a skilled mechanic, sourcing parts, and covering the energy costs of a business are all more expensive than they were this time last year. Again, insurers have had to increase premiums to cover the higher cost of repairing your vehicle. 

3. Replacement parts are being delayed

Due to various issues and conflicts around the world, the global supply chain has become erratic. This means parts being shipped from overseas can become delayed, resulting in cars being kept in garages for longer awaiting repairs. 

This has made offering courtesy cars more expensive (more on this below), which has increased the price of car insurance. 

4. The weather is wreaking havoc

The ever-changing and unpredictable UK weather has led to more weather-related claims. These include icy and wet conditions while driving, and storm or flood damage to parked vehicles. 

5. Car theft is on the rise

Stats show that over 130,000 motor vehicle thefts occurred in England and Wales in 2022/23 (up from 108,000 in 2021/22). In response, many insurance companies have increased their costs to offset the risk that your car might be stolen

6. Second-hand cars are more expensive than ever

The average price of a second-hand car has shot up by 30% over the past three years (£13,601 in 2020 to £17,720 in 2023). This is partly down to a shortage of new vehicles after production slowed during the pandemic, which has pushed prices up for both new and used cars.

This has had a knock-on effect on insurance providers. If your insurer offers a courtesy car while yours is out of action, it’s now costing them more to hire second-hand vehicles — and they’re passing this cost on to the customer.

7. The FCA changed the rules 

In years gone by, many insurers would entice new customers to sign up by offering an introductory deal at an exclusive discounted rate. They would do this in the hopes that customers would auto-renew at much higher rates in a year’s time. Essentially “sleepwalking” into a more expensive deal.

However, in January 2022, the Financial Conduct Authority (FCA) banned these loyalty penalties. Insurers can no longer charge existing customers more to renew than what they’d charge new customers to take out the same policy. 

On one hand, this was excellent news, as it protected existing customers from being caught out by rising costs. On the other hand, it has made it more difficult to switch and save. 

When will the cost of car insurance go down?

It’s hard to say for sure when car insurance costs will go back down. As we’ve outlined above, many insurance providers are simply reacting to external factors outside of their control. 

However, there is a glimmer of hope on an individual level. As you get older and gain more experience behind the wheel, your car insurance premiums should reduce. It’s cheaper to insure a car at 30 than it is at 18, and the price drops further when you reach your 40s and 50s.

Of course, you don’t have to wait around for cheaper car insurance. Let’s look at a few ways you can bring these rising costs back under control. 

How can I reduce the cost of car insurance? 

Here are a few tried and tested ways you can cut the cost of your car insurance:

  • Pay annually (if you can): Paying for your car insurance in one lump sum tends to work out cheaper than paying monthly, as you avoid paying interest. 
  • Shop around for a new policy: Don’t get caught out with an auto-renewal. Set a reminder on your phone to start looking for a new car insurance deal two to three weeks before your current one expires. 
  • Build up your no-claims bonus: A no-claims bonus is a type of insurance discount you get if you haven’t made any claims in the past. If you can accumulate five or more years of no claims, the discount can knock a considerable amount off your yearly car insurance bill. You can even take your no-claims bonus with you when you switch insurers. 
  • Increase your voluntary excess: Your voluntary excess is the amount you voluntarily pay toward an insurance claim after a car accident. Setting a high voluntary excess can lower your car insurance premium. (Just make sure you can afford this excess if you do need to pay it.)
  • Park your car somewhere safe: Where you park your car when it’s not being used can also affect your car insurance premium. If you park on the street, it could be a target for thieves or suffer damage from passing vehicles or vandals. But if you keep it in a secure garage or CCTV-covered car park, it could be considered lower risk by insurance providers.
  • Insure a car with a smaller engine: Although switching your car in pursuit of lower car insurance is a bit radical, it can work. Generally speaking, the more powerful your car, the riskier it is to drive and the more expensive it is to insure. If you want to lower your car insurance premium, consider swapping to a car with a smaller engine.
  • Sign up for black box car insurance: Black box insurance (also known as telematics insurance) uses a special tracking device to monitor and record your driving habits. The technology allows insurers to assess your driving style and tailor the insurance premium based on your actual driving performance. In short, the more responsible you are behind the wheel, the better your chances of earning cheaper car insurance premiums. Learn more about Howden’s Black Box Car Insurance here.
  • Sign up for named young driver insurance: If you’ve recently passed your test and you’re shocked by the price of cover, this special type of insurance for drivers aged between 17 and 27 could help. It lets you be insured on your parent’s car and enables you to start earning your own no-claims discount. Learn more about Howden’s Named Young Driver Insurance here.

In summary

To recap, car insurance has gone up (in some cases quite significantly) due to rising claims costs and soaring inflation. However, there are several things you can do to bring your car insurance costs under control. 

Start by shopping around for a better deal with Howden. Our expert car insurance brokers can help you find a competitive quote. Between August 2023 and January 2024, 51% of our new car insurance clients saved an average of £196. Find out more about our motor insurance process here.

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