The Reason Your Car Insurance Has Gone Up, And Why It May Increase Further

Sorting out car insurance is one of the least fun aspects of motoring, and in recent times, it’s gotten more financially painful. Premiums have been getting more expensive, and you might have noticed that things don’t get much better if you shop around to improve on a renewal quote. So what gives?

The latest report from the Association of British Insurers (ABI) sheds some light on the car insurance misery. It talks of “record motor insurance payouts,” which were up 29 per cent during the second quarter of 2023 compared to the same period last year.

That amounts to £2.5 billion for the quarter, or £28 million a day. There are more claims, too - 592,000, which is an increase of 18 per cent. Among the factors making claims more expensive is the cost of repairing cars, which was up 46 per cent compared to Q2 2022. Repair times are longer, too, and that means courtesy cars need to be leant for longer, so providing such vehicles is now costing 52 per cent more. 

The cost of payouts for stolen cars is up by 53 per cent, now reaching £196 million. That’s partly because used cars are pricier than they used to be. 

The cost of shelling out for personal injury claims has gone down, at least, by eight per cent compared to Q2 2022. “Indications are that the whiplash reforms introduced in 2021 to create a simplified, fairer, more efficient, and cost-effective compensation system are having an impact,” the ABI says. 

The average price of a policy, however, hasn’t gone up by as much as the 29 per cent increase in payouts. It’s up by 21 per cent to £511. This could yet increase further, though, as insurers look to get themselves back in the black - according to a report from consultancy firm EY, UK car insurers operated at a loss in 2022, a trend expected to continue this year. 

EY expects a return to profitability in 2024, but only “providing insurers make the necessary adjustments to premium prices to keep pace with the rate of inflation.”