Recently, motorists have seen a noticeable increase in their car insurance premiums, with price rises of over 50% in the last year, leaving the average premium at almost £1,000, according to Confused.com. Several factors contribute to the rise in insurance costs, ranging from economic influences to changes in the insurance industry. In this article, we look at the key reasons behind accelerating car insurance premiums.
Reasons behind increasing car insurance premiums:
The fundamental reason behind increasing motor insurance premiums is that insurers are losing money on car insurance. EY Consultants estimated in 2022 that for every £1 an insurer collects for a vehicle policy, they pay out £1.10 in claims and operating costs. Consequently, some insurers are pulling out of the market altogether and no longer providing car insurance. The insurers that remain have become increasingly selective when choosing what they will cover. Fewer insurers available means less choice and higher premiums for the consumer.
We’ve all felt the impact of rising inflation recently, and unfortunately, the motor industry is not immune from its effects. Increased costs associated with vehicle replacements, repairs and parts mean an increase in the cost of each claim. The Association of British Insurers estimated in 2022 that vehicle repair costs have risen by 33%, labour costs have risen by 40%, vehicle parts have risen by up to 21%, and the increased cost of energy felt throughout the motor supply chain has seen an average additional cost of £71.75 on a claim. Supply chain issues influenced by international conflicts and the popularity of used cars are also factors.
Technological advances and electric cars
In recent years, many more of us have switched to electric cars. While the benefits are numerous, the complexity of these types of vehicles has increased insurer costs. For example, repairing an electric car will require a specialised mechanic and parts; if the battery has been damaged, that may mean the whole car is written off as that is often the most expensive part to replace, and there are strict storage and towing requirements for electric cars that have been damaged to reduce the risk of fire.
Figures show that vehicle theft increased by 59% in 2022, with Range Rover and other luxury SUV models particularly hard-hit. Often, these cars are stolen for their parts, but the spike in keyless car theft has left them much more expensive to insure, depending on the area that you live in.
The Financial Conduct Authority (FCA) introduced rules in January 2022 forbidding insurers from offering cheaper quotes to new customers (motor and home insurance). This means that new and existing customers should be offered the same price when buying the same cover from the same place. While this is fairer, it won’t stop your renewal becoming more expensive. For the reasons outlined above, insurers costs have increased, which is reflected in the price they charge customers. Plus, a range of other factors affect the premium you pay; for example, if you have changed your vehicle, your address, the mileage you do, or made a claim, this will result in a difference in premium. Small changes can make a big difference to the price of your car insurance.
What are we doing to help our customers?
We understand the impact rising insurance premiums have on our customers, so we have taken steps to try and reduce the impact as much as possible, including:
- Reviewing cover details with our clients. Insurers use real-time pricing when providing us with quotes, so by checking over all the details with our customers before rebroking, we can ensure we don’t need to make any last-minute changes and miss out on a better premium.
- Rebroking every renewal. For all our existing customers, we are searching the market for the best options prior to renewal. One of the benefits of using a broker is that we search the market for you, so we do this for every renewal so that you can trust we’ve found the best price for you.
- Rebroking renewals 21-23 days prior to the policy expiring. Statistically, the closer you are to your renewal date, the more expensive quotes will be. By searching the market well in advance, we can find the best prices available.
If you’d like to discuss your policy, cover details, or premium, please get in touch with our team on 01603 649650.