As if owning a car wasn’t expensive already – fuel, tax, servicing and MOTs – it all adds up. So, drivers are going to be even less impressed with the news that car insurance premiums are only going to get pricier.

We’ve found the same thing in our quarterly Premium Drivers Index – premiums just seem to be going up and up. But why the increase – is it because we’ve all suddenly become a nation of boy racers, or are the reasons all a bit more mundane?

Unless you’re a whizz under the bonnet, cars are complicated things and new cars even more so – especially ones with gadgets and gizmos galore. So, it shouldn’t surprise you to know, that the cost of repairing expensive on-board electronics is just one of the reasons for the rise in car premiums. The weak pound has also meant importing car parts is more expensive than it has been before. So although we’re not necessarily riskier on the roads, when accidents do happen; they’re more expensive to fix. In fact, the average cost of repairs has increased to £1,678 – that’s a 32% rise over the last three years.

But it’s not just pricey parts; insurance premium tax or IPT, has also increased over the years. IPT is automatically added onto the cost of your premium (in case you’re wondering why you’ve never heard of it), it was launched in 1994 at a rate of 2.5%. But since then, the so-called ‘stealth tax’ has increased to 10% and in June 2017, it’ll rise again to 12% – just what you need, right?

And it goes on – because the government is also reviewing what’s known as the ‘discount rate’ – this influences how much gets paid out when an insurance policy gets cashed in. Now, bear with us, because this is where it gets confusing if you’re not paying attention.

The discount rate is a percentage, and it’s basically the amount of interest that someone could get if they invested their insurance pay out. Insurance providers work on the basis that the higher the percentage, the lower the compensation amount needs to be – because the assumption is that you’ll get a good return if it’s invested wisely. The lower the ‘discount rate’ then the greater the amount of compensation, in order to make up for the lack of interest accrued.

At the moment, the discount rate is set at 2.5% but insurance providers fear that if the number is reduced then they’ll need to pay out more, and in turn, this will mean increases in everyone’s premium in order to fulfil successful claims. In the same breath, the government has also said they’d look into capping the amount of compensation paid out for personal injury claims (such as whiplash). The hope is that by limiting the amount paid out, premiums could be reduced by about £40 a year – although that’s potentially small fry in the grand scheme of things (so don’t get too excited).

According to the Association of British Insurers, the average cost of car cover was £462 in the latter part of 2016, compared to 2014 when the average was less than £390. So, if the government gets its way and lowers the discount rate, car owners had better get set for insurance premiums to rise yet again.

But it’s not all doom and gloom – whilst you may not have control over rising insurance costs in general, you may have some say in how much cash you ultimately part with. So, how’s that then? Take a look at our car insurance calculator to see where you can save money on your car insurance. And use our price comparison service to get a range of quotes based on what you need, along with their corresponding prices – so you can see exactly what you’re getting and exactly how much it costs. You might even find some cheap car insurance that’s right for you. No-one ever said shopping for car insurance was fun – but that doesn’t mean it has to be complicated, so search with us and we’ll sort you out – simples.

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