Kayleigh Morgan didn’t think anything of renewing her car insurance, perhaps expecting a small increase, but was left horrified after finding out it had rocketed from £550 to £1,200 a year.
The jump means her monthly bills with insurer Dial Direct would increase from £46 to £99 a month, something she cannot afford.
The 27 year old, who has owned her Ford Fiesta for three years, said: “When I opened my renewal email, I was really shocked. I was worried because, at first, I thought it meant maybe something had happened that I was not aware of, like someone making a claim against me. I’ve never had an accident or claimed on my insurance.”
She is not the only one – car insurance costs have soared with the average cost now £776, after increasing by £119 (18 per cent) in the past three months alone, according to research by Confused.com.
This has made it the third most expensive household bill after council tax and energy, thanks to an increase in claims as more cars got back on the road after the pandemic.
Kayleigh, from Wakefield, said she can’t afford to pay the increased amount and even shopping around left her feeling hopeless after Dial Direct said it could only knock off £50 when she contacted the firm directly.
“With my fixed mortgage coming to an end in the next six months and costs rising in general, it really panicked me as £100 a month is a big sum along with other bills. I’m trying to save money to make improvements on my house, and just so we can have more of an emergency fund, as for example, our boiler has broken three times since moving into our house.”
She said there was no indication of why it had increased and when she spoke to the insurer there were no changes in her details for the policy, Dial Direct just advised that was the best deal its brokers could get.
After trying to find a cheaper deal with LV, she was told the best they could offer would be £1,050 which is still nearly double what she was paying the year prior.
“I have five years no claim bonus. So I used a comparison website where I found a cheaper offer. I don’t know why the others were so expensive.”
She has finally landed on By Miles, which charge drivers based on the miles they drive. Based on how many she drove last year, 4,000 miles, her estimates are now at £33 a month with a down payment of £70, working out around £450 a year.
While she is happy with the solution, other driver will find themselves in a similar position as costs are up across the board.
This is because, during the pandemic, fewer cars were on the road. As a result, the industry saw a reasonable drop in prices to reflect the reduction in claims being made. But now, research suggests normal driving habits have resumed which could mean insurers are having to pay out for more claims than they were two years ago.
The cost of these claims has increased significantly for insurers. Like with many other businesses, this is arguably down to the shift in inflation rates reported over the past 18 months. And this, as a result, has driven up the cost of repairs and maintenance, which in the event of a claim, is covered by the insurer.
Louise Thomas, motor expert at Confused.com car insurance, said: “Car insurance has quickly become one of the biggest expenses for drivers. If prices continue at this rate then there’s no doubt drivers could be priced off the road, as they battle with other rising costs too.
“But what we do know is that many drivers were able to save some money when it came to renewal. And shopping around was the key to this.
“Although this isn’t all drivers can do to save money. We always advise drivers to take a look at the details of their policy and make sure they’re accurate before committing to a price. Updating your mileage, or considering additional security could easily bring your price down.”
Ask Andrew Bailey
Andrew Bailey, governor of the Bank of England, will be answering questions from i readers next week. If you have a query you would like to put to him on the economy – you may be wondering what the future has in store for your mortgage rates, whether there is going to be a recession – now is your chance.
Email us at money@inews.co.uk with Andrew Bailey as the subject line and we’ll publish the best questions, along with Bailey’s answers, on Thursday 3 August.
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.