Car insurance premiums rise: how to get the best deal when renewing

Car insurance premiums increased slightly in the second quarter of 2022, according to the latest report from the Association of British Insurers (ABI). 

However despite the rise, prices remain cheaper than this time last year.

Here, we explain what's happening to the cost of car insurance and offer advice on how to get the best deal when renewing.

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Car insurance premiums rise by £5

The latest figures from the ABI show car insurance premiums averaged £419 between April and June this year.

Prices increased by 1.3% (£5) compared to the first quarter of the year, but were 2.6% (£11) lower than last year.

Average premiums for new policies rose by 3% to hit £500, while renewals increased by 0.5% to reach £371. 

• Find out more: how to get cheap car insurance

Has the loyalty penalty ban affected premiums?

In January, the Financial Conduct Authority (FCA) banned insurers from quoting higher prices to existing customers than new customers.

The change was designed to make insurance pricing fairer for loyal customers, but it also meant that drivers who switch insurer every year to get a cheaper deal could face higher costs.

The ABI says it is still too early to assess the full impact of the ban, but the reduced gap in costs between new policies and renewals suggests some drivers are getting a better deal from their insurer. 

Why do the ABI's figures differ from comparison sites?

The ABI's data is sometimes at odds with the figures provided by price comparison websites in their regular reports. 

That's because the methodologies being used can give different impressions of what's happened to the cost of insurance.

The ABI's report looks at the average price paid by all drivers, both renewing and shopping around. It found that, overall, drivers are paying slightly less now than at the same time last year.

The statistics published by comparison sites however, only cover the prices quoted to drivers who are shopping around. Confused.com's most recent report shows premiums quoted through its site rose by an average of £32 year-on-year in the second quarter of 2022.

It's likely that Confused.com's index more directly shows the effect that removing new customer discounts has had on drivers looking to switch. 

While the two sets of analysis don't exactly align when comparing this year's prices with last year's, they do both show premiums are currently rising. 

Why are car insurance premiums rising?

Insurers are experiencing higher costs and this is beginning to be reflected in premiums.

In its annual report, Admiral said it increased premiums by 16% between March and the end of July due to the higher costs of claims.

Direct Line and Sabre also confirmed they put their prices up in the first half of this year.

The ABI says insurers are struggling with a combination of the following issues:

• a global shortage of semiconductors, which has been worsened by the pandemic and the war in Ukraine
• average used car prices rising by 30% in the last year
• more expensive repairs, coupled with a rise in the cost of raw materials, and delays in getting spare parts
• a shortage of skilled labour in the vehicle repair sector.

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Is it still worth shopping around for car insurance?

If your policy is coming up for renewal, it's still important to do your research and shop around. 

Your insurer might offer you a better deal than you would have got before the loyalty penalty ban, but that doesn't mean it'll be the cheapest overall.

The figures above give a general indication of what's happening to premiums, but they won't necessarily be reflected in your renewal quote. 

Car insurance pricing is based on a host of factors, from your own circumstances (such as your driving history, where you live and your job) to the costs faced by insurers and the health of the wider economy. This means it is not always easy to explain exactly why your quote may have shifted slightly up or down.

• Find out more: how to renew your car insurance

Five tips on getting a good insurance deal

1. Don't auto-renew

Your insurer should send you a renewal quote around a month before the end date of your policy.

If you do nothing, the policy will usually auto-renew at the price that's been quoted, whether you want it to or not. 

If you find a better deal elsewhere, it's important to contact your current provider to cancel the auto-renewal. 

2. Compare deals 

Price comparison websites are a good place to start when pricing up car insurance.

These sites can give an indication of which insurers will offer the cheapest premiums and help you compare the levels of cover on offer.

Don't forget to get quotes from insurers that don't appear on comparison sites, such as Direct Line and NFU Mutual.

3. Set the right excess

Insurance policies come with a compulsory and voluntary excess. The combined amount is how much you'll need to pay if you claim.

Compulsory excesses are set by the insurer, but you can set your own voluntary excess, with options such as £100, £250 and £500 commonly available. 

A higher excess can cut the cost of your premium, but setting it too high can be a barrier to making a claim. 

4. Don't pay out for unnecessary add-ons

Insurers offer a host of add-ons, such as breakdown cover, key cover, legal expenses and personal accident cover.

Before ticking the boxes, consider whether you need these forms of protection.

Check if you're already covered elsewhere - for example some bank accounts come with breakdown cover, and key cover might be included in your home insurance policy.

5. Choose the right insurer

Finding the best insurance deal isn't just about price. You'll want to ensure you're choosing a provider that combines a comprehensive and good-value policy with great service, should you need to claim.

You can check out our 2022 car insurance reviews to find out which providers fared well for both customer service and policy coverage.

• Check you're getting a great deal and search for a new car insurance policy using the service provided by Confused.com. Get a quote now

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