If you’ve opened your car insurance renewal letter recently and felt a wave of disbelief, you’re not the only one. UK motorists have been hard hit by rising insurance premiums in the past 12 months, with many seeing increases of several hundred pounds – even without making a claim.
But what’s behind this sudden surge in car insurance costs? And more importantly, what can you do to avoid overpaying?
Why Has Car Insurance Increased?
There’s no single cause – rather, a combination of economic and industry-specific factors have created the “perfect storm” for higher premiums.
1. Rising Repair Costs
Modern vehicles are packed with technology – from parking sensors to adaptive cruise control, lane assist, and infotainment systems. While these features improve safety and convenience, they also come with a price.
Even minor damage to a bumper or wing mirror can involve complex electronic components, meaning longer repair times and higher costs for insurers. Labour costs have also risen, particularly as garages face staffing shortages and increased overheads.
According to the Association of British Insurers (ABI), the average cost of vehicle repairs rose by over 30% in 2023 alone – and insurers are passing those costs onto drivers.
2. Inflation and the Cost of Living
Inflation has hit nearly every corner of the economy, and the motor insurance industry is no exception. Rising costs for energy, parts, paint, and even paperwork have pushed the average claim payout higher.
Insurance companies work on risk and cost projections – and when their costs go up, so do your premiums.
3. More Expensive Claims
The cost of settling insurance claims has gone up across the board. Whiplash claims, write-offs, personal injury claims, legal fees – they’re all more expensive than before. The NHS recovering treatment costs from insurers adds another layer of financial pressure.
This trend affects all drivers, even those with spotless records. Insurers set prices based on pooled risk – if more people are claiming, and claims are more expensive, everyone pays more.
4. More Drivers, More Traffic, More Risk
After the pandemic, traffic levels have surged. More vehicles on the road means a higher chance of accidents, bumps, scrapes, and thefts. From school runs to commutes and staycations, the roads are busier than ever.
This has directly led to an increase in claims – and higher premiums as a result.
5. Changes to Insurance Pricing Rules
In January 2022, the Financial Conduct Authority (FCA) introduced new regulations that banned insurers from charging renewing customers more than new customers for the same policy. While this was good news for loyal customers who were being penalised at renewal, it led many insurers to rebalance their pricing structures.
In short: insurers are no longer allowed to offer super-cheap “new customer” deals funded by higher prices for existing customers. The result? A levelling out – but often at a higher price point for everyone.
How to Reduce Your Car Insurance Premium
While you can’t stop inflation or global supply chain issues, there are still plenty of ways to bring your car insurance costs down.
Here are the most effective tactics:
1. Shop Around – Every Year
One of the biggest mistakes drivers make is letting their policy automatically renew without checking the market. Even though FCA rules have changed, shopping around still often leads to savings.
Use multiple comparison sites like:
-
Compare the Market
-
MoneySuperMarket
-
Confused.com
-
GoCompare
Then check direct providers like Direct Line, Aviva, or NFU Mutual – who may not appear on comparison sites.
Set a reminder 3–4 weeks before your renewal date – this is often the best time to secure the lowest rate.
2. Increase Your Voluntary Excess
Your excess is the amount you agree to pay in the event of a claim. Increasing your voluntary excess can reduce your premium, as it shows insurers you’re less likely to make small claims.
That said, only choose an excess you could realistically afford to pay if you needed to claim. A common sweet spot is around £250–£500.
3. Improve Your Vehicle’s Security
A car parked on the street overnight is riskier than one locked in a garage or secured driveway. Where you keep your car matters.
In addition:
-
Fitting a Thatcham-approved immobiliser or tracking device can lower theft risk.
-
Installing a dashcam can help provide evidence in the event of a crash or dispute – some insurers offer discounts for having one fitted.
4. Consider a Telematics or Black Box Policy
This is particularly useful for young drivers or those with high-risk postcodes.
A black box monitors how you drive – including speed, braking, cornering, and the times you’re on the road. If you drive safely, insurers reward you with lower premiums.
Some insurers now offer app-based tracking instead of a physical device.
5. Build and Protect Your No Claims Discount (NCD)
Each year you drive without making a claim earns you a no claims bonus – which can significantly reduce your premium over time.
You can often protect your NCD for a small fee, meaning one claim won’t wipe out your hard-earned discount.
6. Be Strategic With Named Drivers
Adding an experienced driver with a clean record (such as a parent or partner) as a named driver can sometimes reduce the premium – especially for younger motorists.
However, avoid “fronting” – where someone falsely claims to be the main driver to cut costs. This is illegal and can void your insurance.
7. Review Optional Extras
Many policies come bundled with extras – such as:
-
Breakdown cover
-
Legal expenses
-
Windscreen cover
-
Courtesy cars
Check if you really need these. You might already have them through another provider (e.g., bank account benefits or separate breakdown cover). Removing unnecessary extras can reduce your premium.
8. Pay Annually, Not Monthly
Monthly payments might seem more manageable, but they usually come with added interest – sometimes equivalent to 15–20% APR.
If you can afford it, paying in one go will almost always work out cheaper.
9. Choose the Right Car
Cars in lower insurance groups are cheaper to insure. Typically, smaller, less powerful models cost less, as they’re viewed as lower risk.
Before buying a new car, check its insurance group. This could save you hundreds per year.
Cheapest and Most Expensive Cars to Insure in the UK
If you’re in the market for a new car and want to keep your insurance costs down, the type of vehicle you choose can make a big difference. Cars are placed into insurance groups from 1 to 50 – the lower the group, the cheaper the insurance tends to be. Factors like engine size, repair costs, safety features, and even how likely the car is to be stolen all play a role.
Cheapest Cars to Insure in the UK (Typically Group 1–5)
These models are known for being affordable to run and cheap to insure – perfect for young drivers, first-time buyers, or those on a tight budget:
-
Volkswagen Polo (small engines)
-
Skoda Citigo
-
Kia Picanto
-
Ford Fiesta (1.0L models)
-
Toyota Aygo
-
SEAT Ibiza
-
Citroën C1
-
Dacia Sandero
Most of these cars have modest performance, low repair costs, and strong safety records, making them popular with insurers.
Most Expensive Cars to Insure in the UK (Typically Group 40–50)
At the other end of the spectrum, these high-performance or luxury vehicles fall into the highest insurance groups. Premium brands, powerful engines, and high repair costs all push up the price:
-
Tesla Model S or Model X
-
BMW M3/M5
-
Audi RS and S series (e.g. RS6, S5)
-
Porsche 911
-
Jaguar F-Type
-
Mercedes-Benz AMG models
-
Maserati Ghibli
-
Alfa Romeo Giulia Quadrifoglio
-
Bentley Continental GT
If you’re looking to cut costs, these are best avoided – unless you’re willing to pay a premium for performance and prestige.