More than two and a half million people don’t drive because they can’t afford the cost of car insurance, research from Citizens Advice found.
Car insurance premiums have been falling this year, but they still remain very high – the average driver is paying 40% more for cover than two years ago, according to Association of British Insurers data.
Here, we look at the alarming impact price rises have had on some drivers and reveal what steps you can take to help reduce costs.
Drivers are being priced out of car insurance
Car insurance is now so expensive that 2.6 million people say they can no longer afford to drive. That’s the finding of a new study from Citizens Advice, which also revealed that almost 900,000 people have had to cancel their cover in the past 12 months.
The latest ABI data shows the average insurance premium was £612 in third quarter of this year. That’s down slightly from a peak of £635 at the beginning of 2024 but still significantly more than the £436 paid by the average driver in July to September 2022.
The runaway costs of car insurance have hit some drivers harder than others.
The report found, on average, that drivers aged 18 to 34 paid twice as much for their car insurance as those aged 35 to 54, and Citizens Advice states that people of colour also spent significantly more on average for car insurance than white drivers.
Citizens Advice has called on insurers to ‘lift the bonnet’ and reveal which factors cause some groups to pay far more than others, such as postcodes and credit scores.
- Find out more: What’s happening to car insurance premiums?
Charged even more for paying monthly
The charity also found 56% of young people pay monthly for their car insurance, which tends to be more expensive than paying annually.
Which? has been actively campaigning for a fairer deal for pay-monthly customers since the beginning of the year.
The Financial Conduct Authority has previously voiced misgivings about whether premium finance, which is necessary to many customers, is offering policyholders ‘good outcomes’. It’s now launching a study to investigate competition in the market.
What can you do to reduce costs?
When asked if people had to take action to make payments more affordable, Citizens Advice found that more than 10 million drivers have taken steps to reduce the cost of their motor insurance in the past 12 months.
This includes reducing their cover of insurance by accepting a higher excess or moving from fully comprehensive cover to third-party only. The latter means if your car is damaged in an accident, you won’t be able to make a claim.
But there are some other ways you can keep costs down without compromising your cover:
1. Shop around
You should always see what other deals are available before you commit to renewing or buying a new policy.
Price comparison sites such as Compare the Market, Confused.com, GoCompare and MoneySuperMarket allow you to view multiple quotes at a glance.
Just remember, not all insurers are on price comparison websites: Which? Recommended Providers Direct Line and NFU Mutual are examples of this.
2. Renew early
You don’t have to wait until the last minute to renew and the sooner you do it, the more likely you are to bag the best deal.
According to research by GoCompare, the cheapest day to buy cover is 26 days before the renewal is due. Customers who buy their insurance on the day it’s due pay an average of 55% more.
A Which? investigation earlier this month revealed even the time of day you buy a policy can make a difference to price. We found the cheapest quotes for car insurance were during the day, with costs hiked throughout the night.
3. Choose annual over monthly
Paying annually rather than monthly will usually work out a lot cheaper.
Insurers tend to charge monthly payers interest, which means the policy will be more expensive overall compared to paying upfront.
If you are unable to pay a lump sum, an interest-free credit card could help. It allows you to make an upfront purchase for the entire year and spread the cost without attracting interest.
4. Keep mileage down
Keeping your mileage in check keeps the cost of cover down. Try to limit the miles you clock up over the year if you can.
But be honest about it. Lying could lead to your policy being invalidated.
5. Change your job title
Your occupation can also impact the price. That’s because insurers consider some jobs more risky than others.
For example, GoCompare found taxi drivers, barbers and even librarians paid the most for their car insurance, while scientists, nursery workers and college lecturers had the cheapest policies.
One trick to get around this price hike – without lying – is to try to tweak your job title. For example, instead of ‘barber’, try saying ‘hairdresser’ or ‘hair stylist’.
6. Haggle for a better price
If you don’t want to switch to another insurer, you might be able to get the price down by haggling.
Contact your insurer to ask it (politely) to explain why it’s as high as it is, and if it would be prepared to reduce it to keep your custom.
It will help if you’ve done a little shopping around first, so you can talk about what its rivals are offering.
7. Add named drivers to your policy
If your premium is high because you fall into a high-risk group (for example, if you’re young or an inexperienced driver), it could be worth adding other lower-risk drivers, such as your parents, onto the policy, to see if this helps bring down the cost.
But be warned. Adding someone else as the ‘main driver’ when you’ll be driving the car most of the time is known as ‘fronting’ and is a type of fraud that can have serious consequences, including invalidating your cover.
- Find out more: how to find cheap car insurance
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Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.