Why has car insurance gone up?

The cost of car insurance has risen by almost 20% in the last six months alone - we explain what's behind these huge increases.

  • Find out why your car insurance is so high
  • Annual premium now averages close to £1000 in the UK
  • Increasing number of expensive electric cars a factor

Car insurance prices continue to rise in 2024, despite record increases in 2023. And according to experts, they show no signs of slowing down.

If you've received your insurance renewal recently, you'll no doubt have seen a hefty increase in the price. If you haven't you're one of the lucky ones. We get scores of message a week from readers asking why their car insurance has gone up so much.

So why is car insurance so high at the moment? There are several reasons at play here, but these will be of little comfort to hard pressed motorists already struggling with rising costs. We explain all...

Why is car insurance so expensive?

There are a number of factors that have contributed to the dramatic rise in the cost of car insurance.

Rising inflation has had an effect on several aspects of the cost of vehicle repairs, including the price of energy, raw materials and labour, according to Confused.com. The same high rates of inflation have also affected insurance costs directly while the cost of courtesy cars for repairers has also gone up.

Newer vehicles are also more expensive to repair or replace thanks to their increasing complexity, with the greater number of high priced electric vehicles on the road a big factor here.

The price of used cars has also had an effect on the price of insurance. Some restrictions in the supply of new cars has resulted in used cars holding their value better, which in turn means higher costs for insurers when covering write-offs or total losses.

How much has car insurance gone up by?

The average price of a car insurance policy in February 2024 is between £650 and £995 according to data.

Figures from confused.com have the average at £995 compared to £776 in the summer of 2023 and just £556 in the summer of 2022. That represents an increase of almost 80% in the space of 18 months.

Meanwhile, the Association Of British Insurers says the average premium paid for private motor insurance was £627 up 12% on the £562 of the previous quarter.  The current average premium is 34% higher compared to Q4 2022, when it was £470.

This is despite the new rules introduced in January 2021 by the Financial Conduct Authority that were designed to prevent more expensive renewals. However, drivers have been hit by alarming rises in the price of insurance renewals.

The Confused.com data is based on its quarterly Insurance Price Index which uses more than 6 million quotes.

The ABI data comes from the ABI’s Motor Insurance Premium Tracker, covering the fourth quarter of 2023. The tracker analyses nearly 28 million policies sold a year.

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How can I avoid rising car insurance costs?

The golden rule of car insurance is to never accept your renewal quote. Insurers rely on customers not going to the trouble of looking for a better deal and so will rarely give you a good deal. Even if you find a better deal elsewhere it is always worth going back to your current insurer to see if they can match it - frequently they will give you a price below your renewal.

Using price comparison sites is the best way to obtain several quotes with very little work. If you register your details it will save your information so you can come back on an annual basis. You may even get a different quote from the same insurer from different comparison sites. That said, some insurers do not appear on comparison sites, so it is worth calling a few others for additional quotes.

Mitigating your risk as a car owner can be a big help in bringing your quote down. Be realistic about your annual mileage, consider investing in an alarm or security device, use your garage overnight if you have one and consider fitting a dashcam - these are all practical things that can help to chip away at your overall risk.

Another thing you can do to bring your premium down is to increase your excess. Many insurers will have a mandatory excess amount but allow you to add an optional excess too. As long as you can have this amount tucked away in case of a claim, this will reduce your overall premium.

Will car insurance go down in 2024?

With the causes of current high insurance prices such as inflation, materials and labour costs unlikely to improve in 2024, industry experts are predicting that car insurance prices will continue to rise this year.

Predictions from financial and consultancy reports suggest that insurance premiums for drivers in the UK will increase by approximately 10% during 2024, although these same predictions suggest that prices will level off into 2025.

At what age will my car insurance drop?

Generally speaking drivers are seen as lower risk as they age. Assuming all other factors remain the same, premiums will fall from the age of 25 onwards, with drivers between the ages of 50 and 60 usually benefitting from the lowest insurance costs.

For those in their 70s and above, the price of car insurance will begin to increase as you get older - insurers deeming you a higher risk.

However, it is important to remember that this is just one factor contributing to the cost of insurance. External as well as personal factors go to make up the overall risk of a premium.