Car insurance costs in the United Kingdom have long been a cause for concern among drivers. The expense associated with insuring a vehicle can often feel like a financial burden, leaving many individuals wondering why premiums are so high. In this blog post, we will delve into the factors contributing to the high cost of car insurance in the UK. From government taxes to legal complexities and societal patterns, understanding these aspects can shed light on the reasons behind the hefty price tags attached to car insurance policies. By unravelling the intricacies of this industry, we aim to provide insights that empower individuals to make informed decisions and find ways to alleviate the financial strain of insuring their vehicles.
What makes car insurance expensive?
1- Rising claim costs
Rising claim costs are one of the main reasons car insurance is so expensive in the UK.
Several factors have contributed to rising claim costs, including:
- Inflation: The cost of repairing cars has increased due to inflation, which means that insurance companies have to pay out more when a car is damaged or written off.
- Supply chain issues: Supply chain issues have also made getting car parts more difficult and expensive, which has further pushed up repair costs.
- Increased value of second-hand cars: The value of second-hand cars has also increased in recent years, which means that insurance companies have to pay out more when a car is written off.
- Increase in car theft: Car theft has increased in recent years, which has also pushed up insurance premiums.
The rising cost of claims has significantly impacted car insurance premiums in the UK. According to the Association of British Insurers (ABI), the average cost of a car insurance claim increased by 46% over the past year – the biggest increase on record.
This increase in claim costs has been passed on to consumers through higher premiums. The ABI reported that the average cost of car insurance in the UK increased by 16% in the first three months of 2023, the highest quarterly increase over a decade.
2- High rate of accidents
The UK has one of the highest rates of road accidents in Europe. This is due to several factors, including:
- Congested roads: The UK has some of the most congested roads in Europe, which can lead to accidents.
- Speeding: Speeding is a major factor in many road accidents.
- Drink-driving: Drink-driving is also a major problem in the UK.
- Distracted driving: Distracted driving, such as using a mobile phone while driving, is another major factor in road accidents.
- Poor road conditions: Some roads in the UK are in poor condition, which can also lead to accidents.
The high rate of road accidents in the UK significantly impacts the cost of car insurance. Insurance companies have to pay more in claims when there are more accidents, which is reflected in the cost of premiums.
Drivers can help to reduce the risk of claiming by driving safely and responsibly. This includes:
- Following the speed limit
- Not driving under the influence of alcohol or drugs
- Avoiding distractions while driving
- Being aware of your surroundings and other road users
Drivers can also help reduce road accidents’ impact on the cost of car insurance by choosing a policy with a higher voluntary excess. You will have to pay this amount towards any claim before your insurance company pays out. Increasing your voluntary excess can reduce your premium, but it is important to weigh the cost savings against the risk of paying a higher excess if you make a claim.
3- Fraud
Insurance fraud is a significant problem in the UK, estimated to cost the industry billions of pounds yearly. This cost is ultimately passed on to consumers through higher premiums.
There are several different types of insurance fraud, but some of the most common include:
- Fake claims: This is where someone claims an accident or loss that never happened.
- Exaggerated claims: This is where someone exaggerates the extent of an accident or loss to get a bigger payout.
- Staged accidents: This is where two or more people conspire to stage an accident to make a claim.
- Fronting: This is where someone takes out an insurance policy in the name of someone with a good driving record, even though they are the ones who will be driving the car.
4- Competition
The UK car insurance market is highly competitive, with over 90 insurers operating. This competition helps keep prices down, but it also means that insurers constantly look for ways to differentiate themselves from their competitors.
One way that insurers do this is by offering a wide range of discounts. For example, many insurers offer discounts for drivers with a good driving record, who drive a safe car, or who park their car in a garage at night.
Insurers also compete by offering different levels of coverage and service. For example, some insurers offer policies, including breakdown or legal cover. Other insurers offer policies that include a courtesy car while your car is being repaired.
The high level of competition in the UK car insurance market is good for consumers, giving them a choice of insurers and policies. However, it also means that consumers must shop around and compare quotes from different insurers to find the best deal.
Other factors that can affect the cost of car insurance in the UK
In addition to the factors discussed above, several other things can affect the cost of car insurance in the UK, including:
- Driver’s age and experience: Younger drivers typically pay more for car insurance than older, more experienced drivers. Younger drivers are statistically more likely to be involved in accidents.
- Type of car: Some cars are more expensive to insure than others. For example, high-performance and luxury cars are typically more expensive to insure than smaller, less powerful cars.
- Where you live: Drivers who live in areas with high crime rates or high levels of traffic congestion typically pay more for car insurance.
- Your occupation: Some occupations are considered riskier than others, and drivers in these occupations may pay more for car insurance. For example, drivers who work in the delivery industry or travel frequently may pay more for car insurance.
- Your driving record: Drivers with a clean driving record typically pay less for car insurance than drivers with a history of accidents or traffic violations.
- Your credit score: Some insurance companies use your credit score to help determine your car insurance premium. Drivers with a good credit score typically pay less for car insurance than drivers with a poor credit score.
Does car insurance become more expensive after renewal?
Yes, car insurance can become more expensive after renewal in the UK. This is because insurance companies base their premiums on several factors, including the latest claims data and the overall state of the economy.
If the cost of claims has increased, or if the insurance company expects to increase in the future, they may raise premiums for all customers, including those renewing their policies.
Other factors that can affect the cost of car insurance after renewal include:
- Your age and driving experience: If you are a young driver or have a recent history of accidents or traffic violations, your premium may increase.
- The type of car you drive: If you drive a high-performance or luxury car, your premium may increase.
- Where you live: If you live in an area with high crime rates or high levels of traffic congestion, your premium may increase.
- Your claims history: If you have claimed in the past, your premium may increase.
Is car insurance more expensive for new drivers?
Yes, car insurance is typically more expensive for new drivers in the UK. This is because new drivers are statistically more likely to be involved in accidents.
According to the Association of British Insurers (ABI), the average cost of car insurance for a 17-year-old driver in the UK is £2,088 per year. This is significantly higher than the average cost of car insurance for all drivers, which is £776 per year.
New drivers are more likely to be involved in accidents for a number of reasons. One reason is that they need more experience driving. This means they are likelier to make mistakes, such as misjudging distances or not seeing hazards.
Another reason is that new drivers are more likely to take risks. This could be because they are overconfident in their abilities or trying to impress their passengers.
Finally, new drivers are more likely to drive at night, when accidents are more likely to happen.
How to reduce the cost of your car insurance
There are several things you can do to reduce the cost of your car insurance in the UK, including:
- Shop around and compare quotes from different insurers. This is the best way to find the best deal on your car insurance. You can use a price comparison website to compare quotes from multiple insurers simultaneously.
- Increase your voluntary excess. This is the amount of money you must pay towards any claim before your insurance company pays out. Increasing your voluntary excess can reduce your premium, but it is important to weigh the cost savings against the risk of paying a higher excess if you make a claim.
- Consider a telematics policy. Telematics policies use a black box device to track your driving habits. If you drive safely, you could be rewarded with a lower premium.
- Make sure you have the right level of cover for your needs. Don’t overpay for insurance cover that you don’t need. For example, if you have an older car, you may not need to have comprehensive insurance.
- Take advantage of discounts. Many insurers offer discounts for things like having a good driving record, driving a safe car, or being a member of a certain organization.
- Pay your premium annually. Some insurers offer a discount if you pay your premium annually instead of monthly.
