You may not be renewing your car insurance just yet, but it’s worth being prepared for what is likely to be a potential shock.
Car insurance customers have become the new victims of UK inflation after the latest figures showed premiums up 43% on last year.
On top of spiralling mortgage and supermarket costs, May’s data from the Office for National Statistics (ONS) saw motor insurance far outstripping CPI inflation – at 43.1% compared to 8.7%.
‘One driver told the Guardian that when the renewal quote for her Saga over-50s car insurance arrived, the cost of the policy had jumped 77% to £2,044 even though “nothing has changed”. She quit the insurer after finding a cheaper deal elsewhere.’ Credit: the Guardian
Car Insurance Renewal
Speaking on a personal level, 20 years no claims, circumstances haven’t changed, I have just recently gone through the process of renewing my car insurance. Rising from £439 p/yr to an automatic renewal cost of £789. I spat out my tea when I read the letter! When I went to cancel the renewal, the insurer didn’t even blink or question why. It’s patently obvious, because they know the increase is shocking and no doubt struggle to justify it to customers already in the midst of a cost of living crisis.
It’s worth noting, whilst it took a lot of shopping around to find a lower price, you are going to need to set some time aside to do it. Be prepared for high figures, and don’t go by what the comparison sites say on first glance. Once you click through and do it on the insurers site directly, the number quickly jumps up. It’s the add-ons on car insurance that seems to be spiking the price, and some (despite putting in fully comp) were quoting the lower figure for fire and theft. Really consider what you actually need and read the offer before you purchase.
When I went direct to one insurer that prides itself for not being on comparison sites, their quote came in at over £1100 on a like for like fully comp quote! After persevering, I eventually settled for a quote at £638. Not great, but better than my renewal price.
Figures from the Association of British Insurers (ABI) put it lower at 16% in the first quarter of 2023. ABI only looks at what customers pay for insurance – not what they are quoted as most others do – but their figure is still far beyond CPI.
Why are car insurance increases higher than overall inflation?
Despite some prices, including fuel, starting to come down – the cost of different goods and services fluctuate at different rates.
Unfortunately for motorists approaching their renewal, many of the costs insurance companies face are still as high or going up – meaning they’re forced to pass them on in the form of higher prices.
Insurance brokers have added that the number of claims has increased this year, pushing costs above premium income and forcing firms to increase prices.
A sharp rise in the cost of second-hand cars during the Covid pandemic and vehicle parts and higher wages across the car maintenance sector have wiped out margins, according to a report by EY.