Car insurance prices soar 29% in a year to hit a new record high, ABI says

Car insurance premiums have risen 29 per cent in a year to a record average of £561, putting further pressure on struggling households.

Insurers say the rising cost of spare parts and labor was behind the increase in annual insurance costs in the third quarter of 2023.

The average premium of £561 represented a 9 per cent rise on the previous quarter and a 29 per cent rise on the same period in 2022, according to trade body the Association of British Insurers.

The ABI tracker analyzes the price paid for 28 million car insurance policies.

The trade body said car insurers were being forced to pass on their own rising costs to customers as premium increases.

These costs include the increase in the price of automobile spare parts and labor. He has also asked the Government to reduce the Tax on Insurance Premiums (see below).

Insurers have reported that the cost of paint has increased by 16 percent and parts have increased by 11 percent in one year.

Other costs, driven largely by the high price of energy, have increased 46 percent.

Additionally, as new cars become more technologically advanced, they also become more expensive to repair.

Insurers also report that a shortage of trained repairers is driving up the cost of claims as repairs are delayed.

This also means drivers need courtesy vehicles for longer periods, another huge cost for insurers passed on in the form of premiums.

Stealth tax raises premiums

The ABI has also launched a stealth tax on insurance which now adds £60 to the average driver’s annual premium.

The insurance premium tax (IPT) adds 12 percent to what motorists pay for insurance.

Last year the tax generated £7.45 billion for the Government, although it also applies to things like home and travel insurance.

The tax is collected from insurers, who then almost always pass it on in full to consumers.

But as insurance premiums increase, the effect of the IPT worsens, since the Government effectively takes the “real” premium and adds 12 percent to it.

The ABI is now calling for this amount to be reduced in the Chancellor’s Autumn Statement later this month.

Mervyn Skeet, director of general insurance policies at ABI, said: ‘We appreciate that another quarter of the rise in motor insurance premiums will be worrying for households who are already dealing with rising costs in other areas.

‘Insurers continue to do everything they can to keep the price of motor insurance as competitive as possible, despite facing substantial cost increases beyond their control.

‘We are bringing together representatives from across the sector to discuss issues such as vehicle safety. However, the government could help drivers with an immediate reduction in costs by reducing the tax on insurance premiums.’

How to save money on car insurance

Shopping around

This is the number one way to save on car insurance. Drivers can save hundreds of pounds by shopping around when renewing their cover.

Insurers can no longer charge new customers more than new ones. That means that if a driver renews, he should be quoted the same (or less) than if he had started a new policy with the same insurer.

But it is still possible to get a better deal by comparing prices.

Consider “black box” telematics insurance

Black box policies are those where the insurer uses a system in your car to monitor your driving, either a separate device or using the driver’s smartphone. They are designed to reward those who drive carefully.

They can substantially reduce premiums once you begin to prove that you are a good driver. Some insurers even offer an initial discount if you take out a telematics policy.

Be careful with named drivers

Another way to reduce premiums is to ensure that only regular drivers are named on the policy.

Adding a young, inexperienced driver can be false economy, especially if you have a large or higher-powered vehicle.

The premium will be affected by the younger driver and may not have a no-claims bonus.

Pay annually if you can

When taking out a new policy, drivers will have the option of paying for the entire year in advance or in monthly installments.

Many opt for monthly payments as it means not having to part with a large sum of money at once, but if you can afford to pay the annual premium up front, you could save money.

This is because your insurer may charge you interest on the monthly payments. It’s worth asking them if there is a difference and, if so, what it is.

Only pay for what you need

Some car insurance deals include additional benefits such as a courtesy vehicle, windscreen cover, breakdown cover and motor legal protection.

These could all definitely be helpful, but they will almost always increase the overall cost of your car insurance.

Many consumers who buy supplemental insurance forget they have it, and some offers are only claimed once every 664 years.