August 11, 2023

Why Car Insurance Premiums Are Higher Than Ever

Persistent inflation in the UK over the last few years has had a widespread impact on practically everyone. Motorists are now suddenly facing a staggering 43% premium surge this year, at least according to the Office of National Statistics. 

The Association of British Insurers (ABI) paints a less dramatic yet still alarming landscape, noting a 16% hike in the first quarter of 2023. ABI’s unique perspective primarily considers the actual insurance payouts rather than mere quotations, setting it apart from other estimates. But it’s still bad if you’re about to come around to renewing your insurance.

A recent look by Confused.com reveals a car insurance inflation rate of 20% for that first quarter, with an average annual premium ringing in at £657.

What's Behind the Insurance Hikes? 

Curiously, despite a few commodity prices like fuel coming down, the volatile ebb and flow of various goods and services remain unpredictable. Higher costs wait for motorists nearing their policy renewals but there are various factors causing those hikes.

It’s a mix of rising salaries, the cost of energy and fuel, and the price of essential raw materials needed for car repairs.

Second Cars

Claim settlements often necessitate courtesy vehicles. Insurers are forking out heftier sums to procure second cars for their clientele during repair phases. May’s ONS intel exposes replacement cars as significant contributors to the monthly upswings in annual percentages. 

Spare Parts 

Factor in raw materials like metals and paints that are skyrocketing beyond conventional inflation rates at the moment, and the picture becomes clearer. Cutting-edge technology in modern vehicles comes with a hefty repair tag. The scarcity of semiconductors, vital for these smart features, exacerbates this. With supply chain hiccups causing delays, prolonged rental durations further inflate insurance premiums.

If you have an older vehicle, particularly a classic, there’s the added challenge of trying to find or manufacture replacement parts from scratch. The costs for garages has gone up and they will need to pass this on to their customers. 

Energy Hikes 

Energy costs, a considerable expenditure for most businesses, have reached unparalleled peaks. High wholesale prices and geopolitical tensions in Ukraine mean you have an environment with elevated energy and labour costs which get passed on to insurers.

How to Reduce Your Insurance Premiums

A few smart strategies may help you reduce your premiums a little and can land yourself a deal that combines both affordability and quality coverage. While factors like accident repairs and personal injury claims have driven up car insurance rates, the fierce competition in the market could be your secret weapon to securing a budget-friendly premium. 

First of all, it’s important to not simply auto-renew. You need to shop around and, if possible, find a better deal, even if you’ve been with the same company for a number of years. Here are a few more ideas from the team at White’s Bodyworks. 

Evaluating Policy Offerings Beyond Just the Price Tag

Before diving headfirst into premiums, it’s a good idea to take a deeper look at the benefits any policy bestows. Key features to look for include:

  • Does the policy offer a temporary car while yours undergoes repairs? If you need this you need it. But if you don’t it can reduce the premium you pay. 
  • Are you covered for your romantic drives through the scenic routes of Europe? Again, this may be something you require or don’t. 
  • In case of an accident, will the policy help you recover uninsured losses, which may include any unforeseen expenses?

After weighing the benefits, always ensure you're clear about the excesses tied to each policy. 

Drive Smart to Save Big

Your driving habits play a pivotal role in shaping car insurance premiums. Adhering to speed limits not only ensures safety but also steers clear of tickets that can spike your premium. Furthermore, consider reducing your car’s annual mileage. Go for carpools, public transport, or even cycling to decrease your vehicle's wear and tear and your insurance costs.

Boost Your Car’s Security

Where you park your car and the security measures you adopt can significantly influence your insurance premium.

  • While driveway parking is good, a locked garage is the gold standard. The better your car's safety at night, the more likely you are to secure a reduced premium.
  • Invest in top-tier tracking devices and immobilisers, even if you have an older car. Consult with your insurance provider to identify the ones that can fetch you the best discounts on their policies.

Young Motorists

For young or novice drivers, consider taking the advanced driving test. Younger drivers tend to be charged a lot more for their insurance because they have less experience. It’s also a good idea to drive a less powerful car, at least for the first couple of years. 

Older Drivers

If you're a parent to teens itching to get behind the wheel, encourage them to get their own insurance on their vehicle. This not only shields your no-claims discount but also helps them establish their own, leading to reduced premiums in the future. 

Voluntary Excess for Better Rates

Finally, reflect on how much you'd be willing to shell out in the event of a claim. If you're in a position to bear an additional £100 or £200 as voluntary excess, this could be your ticket to a more affordable annual premium.

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