Why Has Car Insurance Gone Up?

Have you noticed your car insurance renewal isn't quite as painful this year? You're not alone. After a period of sharp increases, many drivers across the UK are now seeing premiums fall to their lowest levels in two years. But what caused the surge in prices before, and what's behind the recent drop? At The Comparison Expert, we're here to break down the key factors shaping car insurance costs, and crucially, how you can still secure a competitive deal.

The Economic Ripple Effect: Understanding Inflation and Its Impact

The steep rise in car insurance premiums from 2021 to 2023 was largely driven by broader economic pressures. Inflation sent shockwaves through almost every industry, and motor insurance was no exception.

Soaring Repair Costs: Modern vehicles are packed with advanced technology sensors, cameras, and complex electronics. While these features boost safety and convenience, they also make repairs more expensive. The rising costs of parts, labour, and energy for garages led to a significant increase in repair bills for insurers. Electric vehicles, in particular, brought specialist repair and battery replacement costs, impacting premiums for Electric Car Insurance.

Supply Chain Issues: Ongoing global supply chain disruptions meant delays in sourcing essential spare parts. This kept vehicles off the road for longer, increasing costs for insurers who had to provide courtesy cars.

Increasing Vehicle Values: Both new and used car prices shot up, so when a vehicle was written off or stolen, insurers faced larger payouts.

The good news? As we moved into 2024 and 2025, many of these pressures have started to ease. Supply chains have stabilised, and competition among insurers has increased, helping to bring premiums down.

Increased Claims Lead to Higher Expenses: Incident Effects

It's not just about repair costs; the frequency and nature of claims also play a part in shaping premiums.

• Increased Accidents: As traffic returned to normal post-pandemic, more incidents naturally led to a rise in claims.
• Rising Thefts: Car theft, especially of high-end or keyless vehicles, became more common, forcing insurers to pay out more and pushing up premiums.
• Fraudulent Claims: Dishonest claims remain a significant burden. The cost of tackling and compensating for fraud is ultimately passed on to genuine policyholders, adding roughly £50 a year to the average household insurance bill.

Recently, however, insurers have reported a drop in claims frequency, which has contributed to falling premiums in 2024 and 2025.

Understanding Insurance Premium Tax (IPT)

You might not realise it, but a portion of your car insurance premium goes directly to the government as Insurance Premium Tax (IPT). Currently set at 12% for most general insurance products, including car insurance, IPT is a fixed cost that adds to your total bill. While it hasn't changed recently, it's still a factor in what you pay.

Your Factors: Essential to Your Premium

While economic and industry-wide trends have a big impact, your circumstances remain crucial in determining your premium. Insurers assess your risk profile based on several factors, including:

• Your Age and Driving Experience: Younger drivers and those with less experience typically face higher premiums, while those seeking Over 50s Car Insurance often benefit from lower rates due to their extensive driving history.
• Your Driving Record: A clean licence and no claims history will always work in your favour. If you've had accidents or picked up points, expect your premium to reflect this. For those with past convictions, specialist policies like Convicted Driver Insurance can help.
• Your Location: Living in an area with higher crime rates or heavy traffic usually means higher insurance costs.
• The Make and Model of Your Vehicle: The car you drive affects its insurance group, based on value, repair costs, performance, and safety features.
• Your Car Usage: How far you drive each year and whether you use your vehicle for commuting or business will also influence your premium.
• Type of Cover: The level of cover you choose Third Party, Third Party Fire & Theft, or Comprehensive will affect the price.

What Can You Do About Rising Car Insurance Costs?

While some factors are out of your hands, there are still plenty of ways to keep your car insurance premium in check:

• Renew Early: Lock in your renewal price up to 28 days before your policy ends premiums are often lower for early birds.
• Raise Your Voluntary Excess: Agreeing to a higher voluntary excess can reduce your premium; just make sure it's an amount you can comfortably afford.
• Enhance Your Vehicle's Security: Fitting alarms, immobilisers, and parking in a secure location like a garage or driveway can help lower your premium.
• Consider a Black Box Policy: Telematics insurance, which tracks your driving behaviour, can offer lower premiums, especially for younger or less experienced drivers.
• Pay Annually if Possible: Paying your premium in one go usually works out cheaper than monthly instalments, as you avoid interest charges.
• Look at Short-Term Cover: If you only need insurance for a limited period (say, borrowing a car for a trip), Temporary Car Insurance can be more cost-effective than extending an annual policy.

Don't Settle for High Prices. Compare Today!

Car insurance premiums in the UK have finally started to fall after a period of sharp increases, but that doesn't mean you should accept your renewal quote without question. By understanding what's behind these changes and shopping around, you'll give yourself the best chance of finding a policy that suits your needs and your budget.

Ready to see how much you could save? Start comparing car insurance quotes with The Comparison Expert today and drive down your costs!