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Why is my car insurance so expensive?

Why is my car insurance so expensive?

Despite a slight fall in the average cost of premiums, UK motorists still feel they are paying over the odds for their car insurance. So how are premiums calculated? And are there ways to bring the cost down?

Daniel Hutson
From the Motor team
minute read
posted 2 APRIL 2020

Why is the cost of car insurance so high?

There are several reasons why the cost of car insurance is so high, including:

  • The increase in Insurance Premium Tax to 12% in 2017.
  • The Ogden discount rate, applied to compensation pay-outs for life-changing accidents, was cut from 2.5% to -0.75%. This has meant larger lump-sum pay-outs and, therefore, higher premiums.
  • The cost of claims is higher than ever, according to The Association of British Insurers (ABI). Today’s advanced vehicle technology has led to an increase in keyless car crime and more expensive repair bills. This, in turn, has led to increased rates of theft and repair claims.
  • The impact of insurance fraud. The ABI claims there’s ‘one scam every minute’, made up of dodgy claims and dishonest insurance applications, which cost the industry £1.3 billion.
  • Insurance fraud also impacts motor insurance costs. The ABI claims there’s ‘one scam every minute’, made up of dodgy claims and dishonest insurance applications, which cost the industry £1.3 billion.
  • Over the last decade, whiplash claims have risen by around 50%, costing insurance providers around £2 billion a year. Plans by the Ministry of Justice to crack down on whiplash claims and cap compensation have been delayed until 2020.
  • Uninsured drivers make premiums expensive for the insured majority. In 2017, the Motor Insurer’s Bureau (MIB) reported that there are over one million uninsured drivers on UK roads. To cover the cost of payouts involving an uninsured party, honest motorists are paying an estimated £30 more for their annual car insurance.

What other factors can affect the price of my car insurance?

Lots of factors influence the cost of your car insurance, including your individual circumstances. The higher the accident risk, the higher your insurance premium is likely to be. Risk factors include:

  • Your age. Young drivers typically pay more for their car insurance than older, more experienced, drivers. According to our latest Young Drivers research in March 2020, the average annual premium for 17-24 year olds is £1,264.**
  • Your postcode. Some areas are considered at higher risk of theft and vandalism than others. For example, an inner city suburb car will probably cost more to insure than one from a rural postcode.
  • Your job title. If your occupation is considered high risk, you could end up paying more. For example, a labourer might have a higher premium than a secretary.  
  • Your car insurance group. Generally, the higher the group your car is in, the higher your premium will be.

**Compare the Market's Young Drivers research from March 2020.

How can I get cheaper car insurance?

There may be ways of cutting your car insurance costs, such as building up a good no claims discount. If you’re a younger driver, black box telematics insurance could be a good option.

And just by shopping around and comparing quotes, you could save up to £282*** on your premium.

Car insurance is an unavoidable expense. So why not see if you can save money on your next premium by comparing with us.

***Based on Online independent research by Consumer Intelligence during February 2020 50% of customers could save up to £282.66 on their car insurance premium.

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