The Association of British Insurers (ABI) recently stated that, according to their latest Motor Insurance Premium Tracker, the overall average premium paid for private comprehensive motor insurance was £478. That’s up 2% on the previous quarter.
This means that the current average premium is 16% higher compared to Q1 2022. Furthermore, the average price paid by motorists renewing their cover rose by £8 to £436. The average premium for a new policy is up £14 to £545.
In this post we’ll discuss some of the underlying causes for these rising car insurance premiums, before discussing some ways you can save money on the cost of cover.
Looking to save money on car insurance? If you manage a fleet, we can help you manage your motor risks and get the best deal for your cover. For more information, call us on 020 8290 9099 or email commercial.motor@anthonyjones.com.
Why Have Car Insurance Premiums Gone Up in 2023?
There are several reasons why private car insurance prices are rising in the UK. Some of the main factors include:
- Increased number of claims
- Rising repair costs
- Fraudulent claims
- New technology
We’ll discuss each of these in turn, to find out more about how these factors are affecting premiums.
An Increased Number of Claims
Enforced government lockdowns between 2020 and 2021 led to a huge drop in motor insurance claims, as there were simply fewer drivers on the road. Post lockdown the roads are getting busier, and we’re also seeing drops in fuel prices. This means that more people are driving, which means there will be more accidents, which means there’ll be more claims.
An increased number of claims creates higher costs for insurance premiums. Insurers may try to meet these costs through increasing the price of their insurance premiums.
Rising Repair Costs
The cost of living crisis has made everything more expensive: energy prices, rents, mortgages, fuel bills, and the cost of parts and consumables. Labour, too, has become more expensive. And according to some figures, we’re not just seeing a rise in the cost of labour. There’s also a shortage of skilled technicians, particularly those who can work on electric vehicles.
All of these rising costs will result in a corresponding rise in garage labour rates. As a result, it will cost more to repair all kinds of vehicles.
This means that insurers will have to pay out more money in the event of a claim, to cover the increased repair costs. And again, rising premiums is simply a method for insurers to manage their increased expenses.
Rising Levels of Fraudulent Claims
We’ve recently suggested that the cost of living crisis could lead to a rise in insurance claims fraud. Drivers now have to pay more to maintain their vehicles. And due to rising repair costs, many drivers may struggle to afford even minor repairs. This may encourage some drivers to make fraudulent claims.
They may, for example, exaggerate or misrepresent claims so as to cover the costs of repairs they might not otherwise have been able to afford.
Unfortunately, in the long-term, fraudulent claims will make things more expensive for everyone. Fraud costs insurers money. And as we’ve seen, insurers will invariably raise the price of their premiums to meet these costs.
New Technology Increasing Repair Costs
Most new cars now include advanced technology as standard. While tech can make driving easier and safer, it comes at a cost, in that it can be very difficult and expensive to repair.
As we pointed out above, there’s a direct link between rising repair costs and rising insurance premiums. If a high-tech new car costs a lot to repair, then insurers will have to pay out more money in the event of a claim. Insurers may raise their premiums to meet these increased costs.
Other Factors Affecting Car Insurance Premiums in 2023
The ABI has also recently shared examples of increasing cost pressures such as:
- Energy inflation adding to each repair.
- Average paint and material costs have increased by nearly 16%.
- Courtesy car costs to repairers are increasing at around 30%.
Also, according to Auto Trader, the average price of second-hand cars has jumped by 30% in just three years.
Finally, the Government taxes insurance premiums at 12%. Insurers collect this tax on behalf of the government. There’s nothing insurers can do about it, but it does mean that they’ll have no choice but to pass on certain costs to their clients and customers.
How to Reduce the Price of Your Insurance Premiums in 2023
A few things might help you reduce the cost of car insurance:
- Drive an older car from a lower insurance group. Driving an older car also means you’ll avoid the advanced modern tech that can drive up the cost of repairs, and the cost of cover.
- Take steps to reduce the risk of vehicle theft. If you can adequately secure your car, you may be able to make savings on your insurance, as you’ll be less likely to make a claim on your policy to cover a theft.
- Switch insurers. Different insurers charge different rates, so check those price comparison sites.
Finally, working with a broker can help you get the best deal for your insurance. If you manage a fleet, we can help you find car insurance cover that meets your needs at a price you can afford. For more information, call us on 020 8290 9099 or email commercial.motor@anthonyjones.com.
