Car insurance is on the rise - latest stats show average costs
Drivers in the UK are now spending on average £419 a year for their motor insurance, according to the Association of British Insurers' latest tracker.
Although this is only an increase of £5 (1.3%) in the second quarter of 2022 compared to the previous quarter, costs are unlikely to fall any time soon. The increase in the value of second hand cars, plus rising vehicle repair costs, has put pressure on the motor insurance industry.
New laws also came into effect which stops providers charging new customers less than those renewing.
Analysis now shows the average premium paid for a new policy was £129 higher than a renewal. New policy prices increased by 3% to £500, while renewed policy prices rose just 0.5% to £371, the ABI's research found.
Erin Yurday, CEO and co-founder of NimbleFins, said: “The ABI’s research suggests new policyholders are being squeezed the most thanks to the new law brought in by the Financial Conduct Authority.
“However there are deals to be had. We’ve researched the biggest car insurance providers that operate nationally and found AXA and Admiral are the two that offer the cheapest car insurance quotes on average when putting them through our tests. But your quote will vary depending on where you live, the car you drive, your driving history and other factors.
“We also rated and reviewed the top insurance companies on the market to help customers work out which provider is best for them.”
ABI research also explained the motor industry is also facing issues which are increasing prices for insurance companies.
There is a shortage of semiconductors around the world, which started during the Covid pandemic but was also hampered by Russia's invasion of Ukraine. One car uses thousands of these so it will slow down and make repairs more expensive.
There are rising costs in parts and raw materials such as paint, the ABI said, plus a shortage of skilled labour is also pumping up repair costs.
Average used car prices rose 30% last year, according to Auto Trader, and this increases the amount of money an insurance company could be liable to pay out.
Ms Yurday gave advice for saving money on premiums. She said: “If you want to save money on your car insurance it's best to choose a car that is cheap to insure. These are usually older models with smaller engines, such as an older Kia Rio or Volkswagon Polo.
“But if you already own your vehicle make sure you're comparing prices when it comes to renewing your policy. Auto-renewal may save time and hassle but it doesn't mean you'll be getting as good a deal as you did the first time you chose your provider. Increasing voluntary excess and paying upfront rather than monthly will also reduce your premium.”
Callum Tanner, manager of general insurance at the ABI, said: “Insurers appreciate that these are difficult times for many households dealing with the rising cost of living. While, like many other sectors, motor insurers are facing higher cost pressures of their own, which are becoming increasingly challenging to absorb, they will continue to do all they can to keep motor insurance as competitively priced as possible.”
For more tips to save on car insurance, click here and to read more about the cost of car insurance, click here.
To read NimbleFins’ research and reviews of the best car insurance providers, click here.