Is the cost of car insurance going up?
Jason Barker • April 28, 2023
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With the increased cost of living in the UK, many motorists feel they’re paying too much for their vehicle cover. According to Confused.com, the average cost of a car insurance policy in the UK is £629 (as of December 2022). But why is car insurance getting so much more expensive?
- Rising Claim Costs – We have personally experienced supply chain issues and increased costs for parts, leading to a more expensive repair. This is further impacted by insurance companies working against each other. An example of this is where Customer A is hit by Customer B. Insurer A (rather than dealing with the claim themselves) factor the claim out to a claims management company who then overinflate the claim and hire costs, resulting in increased costs for Insurer B. Additionally, the Association of British Insurers (ABI) has suggested that paint and material costs have increased by around 16%, whilst energy inflation has added more than £70 to each repair.
- Increased Technology – A number of more modern, advanced vehicles now benefit from keyless driving and/ or entry. This has led to an increase in car theft and a subsequent rise in insurance premium costs.
- Insurance Premium Tax (IPT) – IPT is levied on most insurances. The standard rate of IPT rose to 12% in 2017, up from 6% in 2015. As a result, an insurance premium of £500 becomes £560 once IPT is added. Coupled with ongoing increases in the cost of living, there is potential that IPT could rise again in the future.
- Accepting Your Renewal Price – Many motorists simply accept their renewal quote each year, without doing any additional research. This results in a high volume of missed savings. Given that many insurance providers increase their prices with inflation each year, the acceptance of such policy costs results in a rise in premiums across the board.
- Overinflated Hire Costs – It is common for customers to be given a courtesy vehicle following an incident. Often, the cost of this is claimed via the third-party insurance company and the costs may be overinflated.
As always, we recommend using the services of a reputable insurance broker to find an insurance policy which meets your individual requirements. Please also visit our blogs ‘How are car insurance premiums calculated?’ and ‘How do I choose the right car insurance company for me?’ for further information.
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