Why has my car insurance gone up? (And what to do about it)

Pricey premiums — the whys, the hows, and what to do.

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Written by: Howden Insurance

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Finding yourself asking, “Why has my car insurance gone up?” You’re not alone. Car insurance premiums have been increasing significantly over recent years, and many have been feeling the pinch.

In this article, we’ll explain exactly why your car insurance premiums have been so pricey recently, what might be in store going forward, and most importantly, what you can do today to keep those car insurance quotes as low as possible in the future.

Why is my car insurance going up and not down?

So, it’s the question we’re all asking: Why has car insurance gone up substantially lately? Because, there’s no denying it, the rise in car insurance prices are substantial.

The Office for National Statistics (ONS) regularly publishes retail price index (RPI) data, which measures the change in cost of consumer spending over time. It showed that car insurance was up by 50% in July 2023 over a 12-month period, far exceeding inflation, which stood at 8.7%. 

You might hear that a fluctuating economy is to blame — and that’s true. But many wonder why this is affecting car insurance prices so much. 

Here are five reasons why:

Post-pandemic trends.

In the pandemic, fewer cars were on the road, so the average premium actually went down every quarter in 2021. But after the worst of the pandemic was over, we started to see more cars on the road (and more car insurance claims), which led to a jump in premiums. Second-hand cars have also become more popular recently, leading to an increase in their value and subsequently higher car insurance costs. 

Energy and supply chain price increases.

A 300% increase in energy bills for repairers means the average cost of repair has gone up by £71.75 since the final quarter of 2022 according to the Association of British Insurers. Transport and manufacturing costs have gone up too, with paint and material costs up by 16% in the last quarter of 2022. 

The ending of the “loyalty penalty”.

Thanks to rules brought in by the FCA in January 2022, car insurance providers can’t charge existing customers more than new customers for a directly comparable policy sought through the same channel. Although this is great news for returning customers, it does mean that you won’t be able to find the “new customer only” discounts you might have previously.

An increase in fraudulent claims.

According to a 2022 report, by Zurich, insurance fraud has risen by a staggering 25% — a figure thought to be exacerbated by the rising cost of living. Unfortunately, this means that car insurance premiums go up for everyone so that insurance companies can cover the extra expense.

Inflation.

You’re bound to have noticed that everything’s increased in price lately, from your weekly food shop to the cost of a new mobile phone — a lot of which is thanks to inflation. This has impacted cars, too, with new materials, repairs, and replacements now much more expensive than they were before. Unfortunately, this means an increase in overheads for your insurer and pricier policies for you.

How much has car insurance gone up in 2023?

So exactly how much has car insurance risen in 2023? 

The average price of comprehensive car insurance stood at £478 in the first quarter of this year according to the Association of British Insurers — this is up by 2% from the previous quarter and 16% compared to the first quarter of 2022. 

The ONS RPI figures of 50% are also the highest we’ve seen so far. 

Why is car insurance so expensive for 2024?

In June 2023, the Financial Times reported that the cost of motor insurance is forecast to rise in 2024, before finally plateauing in 2025.

The key reason for this, according to Paul De’Ath, head of market intelligence at Oxbow Management Consultancy, is inflation in claims costs. Unfortunately, if the worst-case scenario hits and inflation refuses to budge, then claims-costs will continue to rise for insurers, which means pricier premiums for customers. 

How to keep your car insurance premiums to a minimum

Despite the rather ominous economic forecasts, there are things you can do to help keep those car insurance premiums to a minimum. 

Here are our top 10 tips:

  1. Get a broker. A car insurance broker is there to make sure you get the right cover for your circumstances (without paying through the nose). Despite the new rules brought in by the FCA to stop loyal customers being penalised, money expert Martin Lewis has advised customers not to just let their policy auto-renew. If you want the best deal on your car insurance, you need to shop around — and an insurance broker can do that hard work for you. 
  1. Keep your driving record clean and look after your no-claims. Even racking up just a few points on your licence can significantly increase the cost of your car insurance. Keeping your driving record clean also means you’ll be more likely to hold onto your no-claims bonus, which will help drive the price of your policy down when it comes to renewal.
  1. Combine your insurance policies. There are some great deals to be had if you’re willing to combine your car insurance with something else. For example, if you combine your car and house insurance with Howden, you could save over £300 (or £486 if you include van insurance). 
  1. Increase your voluntary excess. If you increase your voluntary excess, you’re likely to see the cost of your car insurance quotes go down. But be aware: if you do need to make a claim, you’ll have to pay more. It’s always a good idea, therefore, to check that you’ll still be able to afford the increased excess before going for this option.
  1. Switch to a car in a cheaper insurance group. Vehicles are placed in so-called insurance groups, which reflect how cheap (or expensive) a car is to insure. If you’re looking to save money on your premiums, then consider purchasing a car in a lower insurance group with a smaller engine, for example: models such as the Citroen C1, the Ford Ka and the Volkswagen Up!
  1. Think carefully about any modifications you make. Modifications to your vehicle, such as engine remapping, can drive up the cost of car insurance. If you do decide to go ahead with any changes to your vehicle, make sure you speak to a specialist broker to make sure you’re getting the best insurance deal for your particular car.
  1. Consider switching to third-party-only insurance. Third-party insurance is almost always cheaper than comprehensive insurance. However, be aware that while your premium payments are likely to be lower, you may end up paying more should the worst happen. 
  1. Lower your mileage. If you lower your mileage, remember to share the specific number when obtaining a new insurance quote (rather than just taking the average). The fewer miles you clock, the lower risk you’re deemed to be by insurance companies, and the lower your premiums are likely to be.
  1. Get a black box policy. If you’re a younger or more inexperienced driver, you’re likely to be charged more for insurance as you’re seen as a higher risk. However, you could make savings with a black box policy. This refers to a telematics unit being placed in the car to monitor how you drive. As long as you drive safely, you’re likely to be rewarded with lower premiums. 
  1. Invest in your car’s security and safety. Spending a little extra on things like anti-lock brakes, anti-theft devices, and airbags may help you lower your premiums in the future, as can making sure you park your vehicle somewhere safely overnight.

While there are great deals on car insurance to be had out there, it’s always worth checking that any policy you take out comes with all the essentials, such as cover for things like windscreens. And remember to always be upfront with your insurer about all the details (even if it drives up the cost of your premiums), as not doing so could void your cover and cost you much more in the end. 

Our final thoughts: Why has my car insurance gone up?

Inflation, the pandemic, and rising energy costs are all significant economic factors that have contributed to the rise in car insurance recently. 

While there’s not a lot you can do to get around these particular economic circumstances, there are things you can put into place to help keep the costs of those premiums down. These include keeping your driving record clean, lowering your mileage, and investing in extra safety features for your car. 

And of course, making sure you get the best car insurance policy for you is crucial, too. At Howden, our specialist team can make sure you get the best deal on car insurance, whether that’s through specialist car insurance, black box or multi-car policies.

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