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