Why Has the Cost of Car Insurance Gone Up?

As we all look for ways to save, the rising cost of car insurance is a growing concern.

According to the Association of British Insurers (ABI), motor insurance costs were up by 12% in Q4 of 2023 on Q3, as a result of record increases in the cost to insurers to pay claims.

The ABI also found that in 2023, motor cover was 25% more expensive on average than in 2022.

There are several key factors that could be to blame for the recent rise in car insurance prices.

 

Why Has Car Insurance Gone Up?

Car insurance costs continue to rise, in part due to the rising costs for insurers.

The biggest factor is repair costs, which have risen because of increasing labour and energy costs.

Other factors include increasing levels of car theft, the rising costs of new and used cars, and inflation.

Longer repair times are also increasing the cost to provide replacement vehicles, and the cost to replace written-off vehicles has increased as new car costs continue to rise.

As electric vehicles become more popular – with some manufacturers planning only to make EVs in the future – this has lead to an increase in expensive, tech-focused cars.

Whilst Prime Minister Rishi Sunak has announced that the ban on selling new petrol and diesel cars will be delayed until 2035, it is expected that electric vehicles will continue to increase in popularity.

Electric vehicles tend to cost more and can be more costly to repair following an accident due to their high-tech components and expensive battery replacements.

There are often delays and backlogs for electric vehicle repairs, too.

For insurers, this can mean spending more on claims and costs than they are collecting in premiums.

With electric vehicles being as expensive as they are, many drivers are looking into buying second hand cars instead.

Second hand cars are keeping their value for longer, meaning more expensive claims for insurers if the car is written off – thereby pushing up insurance costs for drivers.

There has also been an increase in claims following the pandemic, which could explain why car insurance costs have gone up.

The return to normal driving habits and the cost of living crisis have both similarly had an impact on the rise in car insurance costs.

 

How to Make Car Insurance Cheaper

To try and make your car insurance cheaper, you can do the following:

• Re-assess car insurance options
• Reduce your annual mileage
• Pay your annual insurance premium in one go
• Avoid paying for optional extras
• Park close to home overnight
• Opt for telematics car insurance
• Don’t auto-renew
• Pay a higher voluntary excess

Please note that the above list is not exhaustive - there may be more you can do to lower your car insurance costs.

Make sure that you do your research when making any changes to your car insurance or choosing the right insurance provider for you. 

If you choose to pay a higher voluntary excess, you need to make sure that you can afford to pay both the voluntary excess and the compulsory excess set by your insurance provider in the event you need to make a claim.

If you are a new driver, you may be able to add a responsible driver to your policy.

However, you should not add someone as the main driver if they aren't actually the main driver – this is known as ‘fronting’ and is considered to be fraud.

You should also be truthful and accurate when describing your job title, as certain jobs will be considered riskier than others by insurers.

As for telematics insurance, this uses GPS to track your driving behaviour, with safe driving habits being rewarded with lower premiums.

On the flip side, though, poor driving behaviour could lead to a premium increase, so you should drive sensibly.

 

Which Personal Factors Affect Car Insurance?

When insurers calculate your premium, they will consider your personal details and assess how likely you might be to make a claim.

You may be deemed higher risk and quoted a higher price based on the following personal factors:

• Your age
• Your job
• Your postcode
• Your driving record
• Value and age of the car
• How long you’ve been driving
• Annual mileage
• Where your car is kept overnight

The rising cost of car insurance can be frustrating, but understanding the reasons behind the increase can help you make informed decisions.

If you're feeling the pinch, now is the perfect time to review your coverage.

Compare quotes and explore your options to ensure you're getting the best protection at a fair price.

 

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