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Navigating the surge: understanding the rise in car insurance premiums

November 29, 2023

Navigating the surge: understanding the rise in car insurance premiums

Owning a car is becoming an expensive and uncertain prospect across the UK. Between higher costs, increased moves by the government to push green initiatives, and a continued shortage of supplies, uncertainty around financials is rampant

Despite this, car ownership remains constant, with just 21.6% of households NOT owning a car in 2023. However, with rising costs in public transport, alongside route cuts, owning a car is a necessity for many. 

This only makes record-high insurance premiums all the more difficult for households to stomach.

So, why is it so expensive to own a car in the UK these days? 

The driving force behind rising car ownership costs

Several factors are driving the cost of car ownership, specifically insurance, up. Rising costs of living across the board are an obvious one, with the recent autumn statement highlighting that Vehicle Excise Duty (VED) will continue to rise in line with inflation – though not for zero-emission vehicles. Coupled with rising parts costs and a shortage of labour and stock, prices continue to rise. 

But it is insurance that comes as a real shock to many.

A graph showing the year on year increase in insurance premiums
Car insurance prices reach their highest on record -

How much does car insurance cost?

According to statistics gathered from leading comparison sites across the UK, the average cost of a car insurance premium has risen to £924, a 19% increase quarter-over-quarter, and 58%, or £338 year-over-year. This is the highest ever recorded since the WTW/ Car Insurance Price Index was launched in 2006. This goes even further in the nation’s capital, with London's year-over-year costs soaring a staggering 61%. 

Young drivers are taking the brunt of these increases however, with the average 18-year-old looking at an average of £2,995 for an annual policy, up 89% year-over-year. 17-year-olds have seen an even higher, 93% increase in the same period. 

A map of the UK with insurance premiums
Average prices by region -

Why are car insurance costs rising?

There are many reasons for car insurance costs rising, but the most notable, according to experts, are:

  1. Cost of parts and labour
  2. Increased car crime
  3. Incidents of speeding

Rising parts and labour fees

A long-standing issue, it is no secret that car parts prices have been on the rise, due to a combination of Brexit-related trade costs, Covid-induced backlogs, as well as rising inflation. In the UK alone, some components have doubled in price year-over-year as of October 2023. 

This trend has been exacerbated by the UK’s goals to move to zero-emissions vehicles only by 2035, as the average EV repair is 12% more than they’re combustion counterparts as parts are more difficult to come by, and thus cost more. 

These increases are passed on to the customer via increased repair shop prices, or by insurers who cover them.

Increased rates of car-related crime

Back in May, it was revealed that there was a 24.9% year-on-year increase in vehicle theft across England and Wales. This trend has, unfortunately, continued, and is now reflected in insurance prices. 

Despite improved technology in vehicles, this has also led to an increased number of keyless break-ins, with high-end SUVs such as Range Rovers being primary targets. These high-range targets have led to supposed “affluent” areas experiencing an increase, as they are more likely to have vehicles which criminals will target. 

Coupled with the fact that less than 7% of car crimes result in a police charge, the costs are falling on insurance providers, and being passed on to customers. 

Speeding incidents

Another area which may have previously been considered “cheaper” amongst insurance providers, is in rural communities. The issue here is speeding, which has hit a 6-year high in 2023 according to a survey taken by the RAC in February this year. In the poll, 8% said they frequently broke the speed limit on 60 mph rural roads in the last year, while two 40% said they did so occasionally. 

Tragically, these 60 mph rural roads have become among the most dangerous in the country, with 514 deaths across the UK in 2021. 

Norfolk remains an unfortunate example of this, as it contains an infrastructure heavily reliant on A and B roads rather than motorways. This has led to it having the second-most speed offences in the UK, despite the lower population.

As speeding offences increase, so too do insurance premiums as the likelihood of claims goes up, and customers pay for it. 

How is car insurance cost calculated in the UK? 

When providers consider car insurance premiums, they will take several factors into account that can range from broad, such as the area lived in, to narrow, such as the customer's history and age. The most important factors are:

  • Driver's age and experience: Younger, less experienced drivers will be considered higher risk, and therefore pay higher premiums.
  • The vehicle: Make, model, age, engine size, carbon emissions, and more will all be factored in, with more expensive or powerful cars incurring higher premiums. 
  • Driver history: History of accidents, claims, penalty points, and traffic offences will impact a premium, with clean records resulting in lower costs, or no-claims bonuses. 
  • Annual mileage: The more you drive, the higher the risk of a claim, therefore the higher the premium. 
  • Location: Higher crime areas will attract higher premiums as they are higher risk, as will parking on the street or in less developed areas.
  • Occupation: Insurers consider the driver's occupation when calculating premiums, as some may be riskier than others. 
  • Voluntary excess: Opting for a higher voluntary excess (the amount the policyholder agrees to pay towards a claim) may result in lower premiums.
  • Additional drivers: Adding other drivers to the policy, especially younger or less experienced ones, will impact the premium cost. 
  • Security add-ons: Cars equipped with security features, such as alarms or immobilisers, may qualify for lower premiums.  

Is a car subscription your answer to high insurance costs?

Luckily, Drive Fuze’s strategic approach to cost mitigation by leveraging its buying power advantage allows savings to be passed on directly to customers. By insuring an entire fleet, Drive Fuze achieves significant cost efficiencies, translating into a more cost-effective solution for subscribers. This unique position allows Drive Fuze to pass on substantial savings, offering unparalleled value in the car subscription market.

Additionally, Drive Fuze provides flexibility in insurance costs by including fully comprehensive insurance in its car subscriptions. Subscribers benefit from comprehensive coverage without being tied to a full year's premium commitment. This flexibility extends further, allowing subscribers to cancel with just 14 days' notice. Drive Fuze's commitment to providing cost-effective solutions and flexibility sets it apart, ensuring subscribers enjoy a hassle-free and economically sound driving experience.

Please get in touch for support on any of the topics raised and how they might affect you as a driver in the UK.