Latest figures from the Office of National Statistics (ONS) reveal the price of car insurance has risen 43.1% over the last 12 months, with some motorists reporting even higher increases – as much as 70% – when their policy came up for renewal. It’s a complex picture, with many different factors contributing towards the situation. Here, we look at the reasons why premiums are rising and what you can do to help keep costs down…

Higher costs

Insurers are generally blaming increases in premiums on higher costs, with the ABI (Association of British Insurers) reporting a 33% increase in vehicle repair costs. Overall, the UK’s fast-paced inflation has driven up the costs that insurers face when fulfilling claims, such as rocketing motor repair, parts and labour prices, and this, in turn, has seen premiums surge.

Saga, for example, has said it was experiencing ‘high levels of claims inflation’, with spare parts such as microchips and semiconductors, and paint, more expensive than before. Parts take longer to arrive, extending the amount of time that cars are out of action after a claim. This, in turn, extends the amount of time the claimant may require a courtesy car. Given that courtesy car costs have also increased – by around 30 per cent – it all adds up. With insurers finding it increasingly challenging to absorb the extra costs, they are being passed on to customers, resulting in higher premiums at renewal.

Changes to regulation

At the start of 2022, the so-called loyalty penalty was banned, which meant that insurers could not charge more to existing customers than new ones. This resulted in increased prices for everyone.

Second hand car prices soaring

The average price of a second hand car has soared by around 30 per cent over the past three years, mainly as a result of the continued shortage of new cars, following the disruption of the pandemic and the shortage of raw materials. The higher second hand car prices have also helped to wipe out margins for insurers, again causing premiums to rise.

Greater number of claims

The number of claims has also increased this year, pushing costs above premium income and forcing insurance firms to increase their prices. During the pandemic, the number of claims was lower than normal due to fewer people driving during the pandemic, but now people are back to their normal routines, the number of claims is increasing – and the cost of premiums.

Increased car theft

There has been a marked increase in car theft, up 25% on the previous year in 2022, especially the high-value vehicle market. This is attributed in part to the escalating value of used vehicles and the cost of living crisis. The scarcity of available used cars has placed them in higher demand, making them attractive targets for thieves, and driving up the potential resale value for stolen vehicles. As a result, insurers have increased premiums more for drivers with higher value vehicles.

Tips to keep insurance costs down

Given that premiums are increasing due to a whole range of factors, there are still measures you can take to help keep your renewal costs down:

• Pay insurance costs annually if you can, so you won’t be charged any interest on the bill.

• If there are more than one car in your household, you could benefit from a multi-car policy.

• Know when your renewal date is and ideally lock in a premium around 29 days before your policy starts, as your insurance is likely to become more expensive the closer to renewal you get.

• Improve the security of your car – adding locks, alarms and immobilisers can help to save on your insurance.

Talk to Melville Burbage

With families facing higher cost of living bills, times continue to be tough for many motorists, with rising motor premiums just another increased cost to be absorbed. Melville Burbage is committed to arranging motor insurance that is as competitively priced as possible and offers good value for money, and would urge anyone concerned about their motor insurance to get in touch, so we can find an appropriate solution. We will always search through a panel of insurers to find the most competitive deal for your needs.

To discuss your motor insurance, please get in touch at 01635 43880 or email: info@melvilleburbage.co.uk

Sources:
theguardian.com: UK drivers complain as car insurance renewal costs rise up to 70%
abi.org.uk: Sustained cost pressures on insurers push the average price of motor insurance to a record high
inews.co.uk: Why has car insurance gone up?
independent.co.uk: Why has car insurance risen so much
consumerintelligence.com: Premium inflation surge for high-value vehicle market in H1 2023