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Car insurance cost 25% more in 2023 - will prices fall this year?
Soaring repair costs remain the main driver behind premium price rises
A series of record car insurance rises meant premiums were almost £100 more expensive last year than in 2022 - an increase of 25%.
The latest analysis from the Association of British Insurers showed motorists paid an average of £543 in 2023, up from £434 in 2022.
Drivers hoping falling inflation would slam the brakes on car insurance price hikes will be disappointed, as ABI figures show the average premium in the last three months of 2023 jumped 12% on the previous quarter - up from £562 to £627. The current average premium is 34% higher compared to the final quarter of 2022, when it was £470.
Here, Which? explores the reasons behind this latest rise, looks into when prices will fall, and offers advice on what you can do to keep costs down.
Why is the cost of car insurance so high?
The rate of CPI inflation may have dropped dramatically from its peak of 11.1% in October 2022 to 4% last December, but the ABI claims soaring repair costs continue to be the main driver behind premium price rises.
Figures show that the cost of repairs jumped 32% in the third quarter of 2023. Other cost pressures reported by insurers during the same period include longer repair times - this drove up the cost of providing replacement vehicles by 47%. The cost to replace written-off vehicles has also increased as the average price of new cars has risen 43% over five years.
The ABI points to technological advancements in new vehicles for why the cost of repairs and replacements are on the up. Electric vehicles in particular require more specialist expertise to repair and take longer to fix.
All of these pressures mean insurers are spending more on claims and costs than they are collecting in premiums.
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When will the price of premiums start falling?
Motorists have seen the price of car insurance rocket in 2023 and sadly there doesn't appear to be signs that this year will be any better.
The Financial Conduct Authority (FCA) is warning that the price of premiums will continue to rise in 2024 as the cost of repairs continues to soar. The BBC reports that the regulator has now written to MPs, expressing concern about the possible impact this might have on consumers already squeezed by cost-of-living pressures.
In the letter to the Treasury Select Committee, the FCA said it 'would monitor the data closely, particularly with a lens of ensuring consumers receive fair value'.
Which? research has found that those who can't afford to pay off their policy for the year in one go can end up paying hundreds of pounds more in interest on monthly repayments, despite being less financially resilient. In light of these findings, we are calling on the FCA to do more.
Rocio Concha, Which? Director of Policy and Advocacy, said: 'The regulator must set out an action plan which includes publishing an analysis of firms' interest rates, naming and shaming the worst offenders; assessing how much it costs firms to provide premium credit; and taking immediate action against providers found to be charging monthly customers excessive interest rates.'
How to reduce the cost of car insurance
The price of premiums may be rising, but there are some simple ways you can reduce the cost of your cover in 2024.
The first should be a no-brainer for all savvy consumers - shop around. Even with less competitive prices out there, you should always see what other deals are available before you commit to renewing or buying a new policy.
Price comparison sites such as Compare the Market, Confused.com, GoCompare and MoneySuperMarket allow you to view multiple car insurance quotes at a glance. Just remember, not all insurers are on price comparison websites: Which? Recommended Providers Direct Line and NFU Mutual are examples of this.
Renewing early and opting for an annual policy instead of monthly could also save you hundreds of pounds. Keeping your mileage in check keeps the cost of cover down and, surprisingly, your occupation can also impact the price. One trick to get around this price hike – without lying – is to try and tweak your job title. For example, instead of 'barber', try saying 'hairdresser' or 'hair stylist'.
Finally, if you don't want to switch to another insurer, you might be able to get the price down by haggling. Take a look at our guide for tips and advice on how to talk the talk and get a better quote.
- Find out more: how to find cheap car insurance
