Why is car insurance so expensive?

Car insurance can often feel like a hefty burden on your budget, and if you’ve ever wondered why the costs are so high, you’re not alone. Understanding the factors that drive up insurance premiums can help you navigate the world of car insurance more effectively and potentially find ways to reduce your expenses. This guide delves into the key reasons behind the high cost of car insurance, including vehicle-related factors, personal driving history, and broader economic influences.

Why is my car insurance so high?

Several factors contribute to the high cost of car insurance:

• Increased repair costs. Advances in vehicle technology and the rising cost of parts have made repairs more expensive. Modern cars often feature complex electronic systems and high-tech components, which can be costly to repair or replace after an accident.
• Rising claims costs. The amount insurers pay out for claims has been increasing. This is due to more expensive vehicle repairs, higher medical costs for injuries, and increased claims frequency.
• Fraud and theft. Insurance fraud and vehicle theft continue to drive up costs. Fraudulent claims and stolen vehicles lead to higher premiums as insurers try to cover the losses.
• Changes in legislation. Recent legal changes, such as the increase in the minimum compensation payouts for injury claims, have contributed to higher insurance costs. Insurers often pass these increased costs onto consumers.
• Increased risk factors. Factors such as higher accident rates and more severe accidents have led to increased risk for insurers, resulting in higher premiums.

Have car insurance costs gone up?

Yes, car insurance costs have risen significantly in recent years. According to Association of British Insurers, there has been a steady increase in premiums due to the factors mentioned above. For instance, comprehensive car insurance premiums in the UK have experienced fluctuations but generally show an upward trend, reflecting the growing costs of claims and repairs.

Reasons for price hikes

• Economic factors. Inflation and economic changes affect the cost of car repairs, parts, and medical expenses, all of which contribute to higher insurance premiums.
• Increased legal costs. Legislative changes and higher compensation payouts for claims have added to the insurers’ expenses, leading to increased premiums.
• Technological advances. While modern vehicles are safer, they are also more complex and expensive to repair, which impacts insurance costs.
• Frequency and severity of claims. An increase in the number and severity of claims can lead to higher premiums, as insurers anticipate greater payouts.

Average car insurance price increases

Period	Average car insurance cost	% Increase
2020	£593	–
2021	£522	-12%
2022	£554	6%
2023	£776	40%
2024	£882	14%

*Source: Confused.com (average car insurance cost).

What to do if your car insurance has doubled

Experiencing a sudden increase in your car insurance premium can be frustrating, and even concerning. If you find yourself asking, “why has my car insurance doubled?” – here are some steps you can take to manage, and potentially reduce your insurance costs:

• Increase your voluntary excess. Your excess is the amount you need to pay towards any claim. Opting for a higher voluntary excess can cut your premium. Just don’t set it so high that you can’t afford to pay it if you need to claim
• Avoid paying in monthly instalments if possible. If you pay monthly, your insurer will apply interest. As a result, you’ll end up paying more overall than if you paid the full annual premium up front.
• Consider adding a named driver. Adding a lower-risk, experienced named driver to your policy could lower your premiums, especially if you’re young and new to driving.
• Drive safely. Not only will this reduce your risk of having an accident, but every year that you drive safely and avoid needing to claim will increase the no-claims bonus on the following year’s premiums.
• Avoid inessential modifications. Cosmetic or performance enhancements, such as a bespoke paint job or a pumped up engine, are likely to drive premiums up.
• Consider telematics insurance. This uses a small device – a “black box” – installed in your car to track your driving habits. Careful driving is rewarded with lower premiums.
• Tweak your job title. You can’t lie about your job. But, surprisingly, making small adjustments in how you describe your profession can change how much you pay for insurance.
• Shop around every year. Always compare car insurance prices rather than just renewing with the same insurer. The best-value insurer last year may not be the best value when renewal rolls around.

Bottom line

If you want inexpensive car insurance, you’ll need to compare the options available from a range of insurers. From third party cover to fully comprehensive cover, there are a wealth of policies and providers to choose from. The right policy at the right price is out there — you’ve just got to go and find it. Compare your options to find cheap car insurance that’s right for you.

Frequently asked questions about cheap car insurance

• How can I get a lower rate on my car insurance?

  Start by dropping coverage that you don’t need and increasing your excess. Then work on improving your driving record and reducing claims. Shop around to get better deals, and then talk to your current insurer to see if you can get a lower rate before switching to a different insurer.

• Is budget car insurance a good idea?

  Budget car insurance companies can offer a good rate for drivers who have trouble getting covered, but they’re not for everyone. You might find better customer service, mobile apps and coverage from bigger national companies, but those benefits don’t always come with the lowest insurance rates.

• How do I find cheap insurance companies near me?

  Sometimes small insurance companies or local and regional companies understand your needs better than the big national companies.

*Based on data provided by Consumer Intelligence Ltd, www.consumerintelligence.com (July ’24). 51% of car insurance customers could save £523.17