As the cost of living continues to increase across the board, car insurance has become the latest headache for households, the latest figures reveal.
The cost of renewing motor policies has grown by more than a third over the past year, according to data collected by market researcher Consumer Intelligence.
This is in part due to the ongoing fallout from the pandemic and the resulting disruption on supply chains, which have pushed up demand for vehicles and pushed prices higher.
How much has car insurance increased by?
Quotes for car insurance policies were up 34 per cent in the year leading up to May 2023, according to Consumer Intelligence, which marks the largest annual rise in costs since the group began tracking them in 2013.
The average motoring insurance policy now costs £1,082, while drivers under the age of 25 are paying an average of £2,145 to protect their vehicles.
Those costs are set to accelerate by the end of year, too: Consumer Intelligence found that bills rose 14.4 per cent between February and May alone. The consultancy EY expects another 11 per cent rise of £59 per policy, on average, to come in across next year.
According to the Office for National Statistics (ONS), car insurance has increased in cost far more quickly over the past year than Consumer Prices Index (CPI )inflation, at 43.1 per cent compared to 8.7 per cent respectively.
The Association of British Insurers (ABI) previously warned that the average price of motorists renewing their policies climbed by £8 between the last quarter of 2022 and the first quarter of this year.
Why have premiums increased?
Insurers are facing much higher costs across the board, including wages and the raw materials needed for repairs, and so are passing on the costs to their customers.
According to the ABI, expenses including repair costs, energy costs and paint costs are among those driving up the cost of insurance policies. The cost of used cars has also increased.
In the first quarter of this year, the annual cost of vehicle repairs increased by 33 per cent to hit £1.5bn, which was also the largest amount since the ABI began compiling the statistics in 2013.
Claims often rely on the use of courtesy cars, which means that insurers are having to pay a lot more for second-hand vehicles that they pass on to customers.
In May, the ONS said that second-hand cars were among the “largest upward contributions to the monthly change in both CPIH (consumer price index with housing) and CPI annual rates”.
Figures from vehicle marketplace Auto Trader show that the average price of a second-hand car has soared by 30 per cent over the past three years, largely due to a continued shortage of new cars in the wake of pandemic disruption to the industry.
How can I keep my car insurance costs down?
There are several tricks and tips you can use to keep your renewal costs down.
First, it is advisable to pay your insurance costs annually if you can, as your provider will not charge you interest on your bill. A typical young driver may be charged around £5,278 for an annual insurance bill with Churchill, but if they pay monthly with 29.4 per cent interest it would cost them £5,806 instead, a difference of £527.
Second, knowing exactly when your renewal date is can help you save, as your insurance will likely become more expensive the closer you get to your renewal date.
You can lock in a premium up to 29 days before your policy needs to start, which means that you can save money by finding a good deal just under a month before you need to renew.
Data from comparison site Go Compare shows that customers saved an average of 44 per cent by buying their insurance 27 days before their renewal date, compared with renewing on the day.
Improving the security of your car can also help slash costs. Adding bike locks, alarms and immobilisers to ward off robbers can save you up to a third on your insurance.
Adding complete and accurate information to your application is also crucial. For example, your job title can impact your renewal costs: Go Compare found that swapping your role from “builder” to “construction worker” can save you £5 a year, while changing “chef” to “caterer” can save you £20.
“As well as using price comparison sites to find the best deals, drivers should also be accurate with information they give to insurers,” said Louise Thomas, motor insurance expert at Confused.com.
“For example, telling your provider that you drive fewer miles than you actually do doesn’t necessarily mean that you’ll get a cheaper price. If feasible, paying for your insurance annually and having a multi-car policy can also help with the price you pay.”
