Average car insurance prices have increased by 58% in a year according to data from Confused.com. This means a typical comprehensive policy was £995 at the end of 2023.
When it comes to young drivers the numbers are even harder to swallow – the cost has increased by £644 a year to rise from £1,365 to £2,009, according to data from another price comparison site, Compare the Market.
It said the total cost of running a car can reach, on average, £3,043 a year for young motorist.
Why are car insurance premiums rising?
According to My Motor World one of the major factors is the increase in the number of insurance claims.
Claims have risen because through a combination of factors, including changing driving habits after the pandemic, the damage inflicted by extreme weather and potholes and an increase in cases of car theft, particularly for high-end vehicles.
As well as rising numbers of claims, the cost of paying out on them has also increased. My Motor World said inflation, supply chain issues, auto parts shortages and the high cost of parts for electric vehicles have all increased the cost of repairs for the insurer.
As a consequence of having to deal with the higher number of claims, insurers’ admin costs have gone up whilst they are also dealing with the rising costs of their own overheads.
In a nutshell, insurers are facing much higher costs, which they then pass on to customers in the form of higher premiums.
Which drivers are most impacted by rising costs?
Both young drivers and those with fast or powerful cars are being hit hardest by price hikes.
According to GoCompare, in 2023, cars like the Tesla Model-Y, the Mercedes-Benz GLE, and the Land Rover Defender were among the most expensive vehicles to insure.
These cars are likely more expensive owing to the higher cost of maintenance and repairs, which in turn pushes up the cost of the claim for the insurer. They may also be at a greater risk of being stolen.
Meanwhile, GoCompare said the cheapest cars to insure included the Toyota iQ, the Fiat Panda, and the Suzuki Alto — all small, reasonably priced vehicles that tend to have lower running and maintenance costs.
Young drivers, particularly those aged 20 and under, have also been hit hard by price rises. Younger drivers tend to put in more claims but also many will have lost out on driving experience during the pandemic.
Compare the Market said young motorists who only have UK driving licences for cars with automatic gearboxes are facing the steepest rises in the cost of car insurance.
Car insurance premiums for drivers aged under 25 with licences to only drive automatics have surged to £2,803 on average – a £916 increase year-on-year. These drivers now typically pay £760 more for insurance, compared to motorists with licences to drive both manual and automatic cars. Many more drivers are passing their driving tests in automatics.
Julie Daniels, motor insurance expert at Compare the Market, said: “The increasing cost of car insurance is concerning for young drivers across the board, particularly those who have only learnt to drive automatic cars. These drivers face paying over £900 more this year to insure their car.
“If the cost of driving continues to increase, it may force some young motorists off the road. People should encourage any young drivers they know to look for savings online. Shopping around for a cheaper policy is one of the best ways to try and save money on car insurance.”
How to cut the cost of your car insurance
Shop around
Daniels suggests young drivers – or any drivers for that matter – keen to cut their costs as much as possible shop around for the cheapest deal. You can do this using price comparison websites to easily weigh up the suitable deals.
Experienced named driver
She said young drivers could also try and lower their car insurance premium by adding an experienced named driver to their policy. This is a legitimate way to bring down the cost of insurance as long as the more experienced motorist also drives the car. However, it is essential that all information provided to your insurer is accurate.
Telematics
Another tip for young drivers is to consider a telematics policy, also known as black box insurance. Telematics policies allow insurers to provide more accurate risk pricing and therefore may reduce premiums for those who demonstrate that they are safe drivers.
Pay up front
Paying your policy in advance is cheaper than paying monthly by direct debit. If this is not possible in the short term, considering opening a savings account to put money away in the lead up to your renewal.
Adjusting the voluntary excess
Play around with the voluntary excess to see if you can reduce the cost. The voluntary excess is the money you will pay yourself if you need to make repairs to your car following an accident. If it’s set at £250, you will pay the first £250 of the cost and the insurer pays the rest if the claim is successful.
You can find more tips on how to lower your car insurance here.
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.