Across the industry, car insurance prices have risen, mainly due to claims costs and rising inflation.
The Association of British Insurers (ABI) reported that the current average insurance price was 15% higher in the first three months of this year compared to 2022[1].
Also, it reported that the average price of second-hand cars has jumped by 30% in three years, and vehicles are generally more sophisticated, meaning fixing them is more expensive. This impacts the cost of claims.
We want to explain why this is happening to be transparent and reassure you that we understand.
Why are renewal prices higher than last year?
In January 2022, the FCA introduced new rules for the insurance industry to protect loyal customers from being charged more than new customers who often benefited from a new customer discount.
This means renewal prices for existing customers will always be the same or lower than the equivalent price for a new customer.
However, this doesn't mean renewal prices are guaranteed to be the same or lower than last year. Read our explainer on what affects your car insurance price.
We always recommend you should check other insurance providers to make sure you get the best cover and price for your needs.
Claims costs are on the rise
The increased cost of claims is the main reason car insurance prices have gone up so dramatically over the past year or so.
The cost of insurance policies was generally low after the COVID-19 pandemic, as we experienced lower claim volumes because everyone was staying home more. This was why we launched our £25 Stay at Home Refund in 2020 to reflect the reduced insurance claims during this time.
However, there are other external factors which have added to the increased cost of claims. They include:
Severe weather
The extreme hot and cold weather we have experienced over last year led to more weather-related claims.
Car theft
There were 130,521[2] motor vehicle thefts in England and Wales in 2022/23, a significant increase compared to the previous year. This, combined with fewer parts available, has made settling claims costlier.
Car repairs
Like everything else, repairing your car, hiring skilled mechanics, and running a business is more expensive now. For example, the cost of repairing vehicles in the UK has increased by 33% and labour costs are up more than 40%[3].
Energy crisis
Energy prices have risen dramatically since 2022, which has added more than £70[1] to each repair in the UK according to the ABI.
Delays to parts
Around 40% of work is affected by parts delays[1], meaning cars are likely be in the garage for longer. The increased cost of providing courtesy cars has influenced the price of insurance.
Inflation impact
You might not know this, but inflation affects how we calculate insurance prices.
As car insurance cost is for a year of cover, we price our current policies for future inflation and the inflation that has occurred to date.
This is because a claim can take months, or even years, to settle, and inflation continues to apply until we settle a claim.
What we’re doing to help
We know that car insurance costs aren't the only thing that’s increased over the past year, which is why there’s so much frustration right now.
It’s not a situation we take lightly, and we’re doing everything to make sure our prices are a true reflection of the risk presented.
We’re constantly monitoring the situation and reducing our prices when we can, but just like every other business, the increase cost of things affects us and our suppliers.
If you’re struggling to pay your insurance, please get in touch with us, and our friendly customer service staff can see how they can help.
But remember, if you need to make a change to your account, it’s cheaper to do it in MyAccount.
See more ways you can get cheaper car insurance.
References
[1] Above inflation costs for insurers continue to put pressure on motor insurance premiums | ABI
[2] Motor vehicle theft in England and Wales 2023 | Statista
[3] Sustained cost pressures on insurers push the average price of motor insurance to a record high | ABI
