Has car insurance got more expensive?

People renewing their car insurance in the past year may have had a shock at their renewal price. Many are asking: why is car insurance so expensive –but does the data match what people are seeing?

According to the Association of British Insurers (ABI), the average cost of car insurance reached records highs in 2023. In the third quarter of 2023, they reported that:

• The average premium paid for a comprehensive car insurance policy from July – September 2023 hit £561, an all-time record high.
• That is a 9% increase from April– June 2023 (which was a record!) and an increase of 29% compared to July –September 2022. [1]
• According to EY, premiums are expected to rise a further 10% across 2024 [2]

It’s clear that the cost of insuring a car has got more expensive, but why has car insurance gone up?

Why is car insurance so expensive?

Put simply, car insurance has gone up because the costs to insurers have increased, and they’re passing these costs onto customers. Insurers costs include things like paying out on claims made by customers, as well as overheads for running their business (offices, staff costs, etc.).

According to EY, in 2022 UK motor insurers reported a loss-making Net Combined Ratio (NCR) in 2022 of 109.5% and predicted an NCR in 2023 of 114.6% [2]. This means that for every £1 they take in, insurers are predicted to lose around £1.15 in 2023.

This has been driven by a few different factors. Broadly put, it is down to the continued inflationary pressures throughout the whole economy, and some car industry specific factors:

• The costs of parts and materials has gone up, increasing the cost of repairs e.g. the cost of paint has gone up16% and spare parts have gone up 11% [3]
• Insurers have responded to new rules on the ‘loyalty tax’. Because insurers are no longer allowed to charge existing customers more for their premiums, they’ve increased their fees
• Rising energy costs have impacted repairers – energy costs have gone up for everyone, impacting the cost it takes to repair a vehicle
• The cost of second-hand vehicles has increased. This is great if you’re selling a vehicle, but now that used cars are worth more, it costs more to insure them!

Car insurance has gone up to respond to these costs. This is a turnaround from the pandemic, where car usage and claims were low, allowing insurers to make profits.

[1] ABI website, accessed 21-Feb-24

[2] EY Press release, accessed 21-Feb-24

[3] Q3 2022 – Q3 2023, ABI website, accessed 21-Feb-24