Car insurance premiums hit another record high – how can you save on your cover?

The average price of car insurance has rocketed by 29% in the past year, according to the latest figures from the Association of British Insurers (ABI).

The analysis of 28 million policies showed drivers paid an average of £561 in the third quarter of 2023 – the highest that prices have been since ABI's records began in 2012. It's also a 9% jump on the second quarter of this year when premiums cost an average of £511.

A separate poll by comparison site Compare the Market revealed a 49% year-on-year increase in the cost of car insurance premiums in September. The ABI figures, however, show what customers paid rather than just quoted, so give a more accurate picture of what UK drivers are actually spending on cover.

Which? delves into the reasons behind these record rises and offers advice on what you can do to lower your premium.

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Why is car insurance getting more expensive?

A combination of 'inflationary pressures' and an increase in the cost of vehicle repairs are the main reasons why insurers are hiking the price of premiums, the ABI claims.

In the third quarter of 2023, insurers reported price rises of 16% for materials, 15% for labour and 46% for other costs, largely driven by the price of energy. 

The ABI also blamed delays in the repair and supply chain, as well as advances in technology making cars more expensive to fix.

• Find out more: best car insurance companies

Cut tax to reduce premiums, says ABI

The ABI claims that £60 – or 12% – of the average premium is made up of tax. Insurance Premium Tax (IPT) is a levy applied to most general insurance products including motor, home, pet and health insurance. 

Mervyn Skeet, ABI Director of General Insurance Policy, is urging the government to include an immediate reduction in the rate of IPT in its Autumn Statement announcement on 22 November, arguing it could help ease the burden on many drivers already grappling with rising costs in other areas.

The call comes as new research by finance company Premium Credit shows the number of insurance customers using credit to pay for one or more policies has soared in the past year.

Its study found that 48% of customers said they paid for motor insurance with credit in the past 12 months compared with 40% the previous year.

• Find out more: Autumn Statement 2023 - what's rumoured to be announced?

7 tips to cut car insurance costs

The price of premiums may be rising, but there are some simple ways you can reduce the cost of your cover.

1. Shop around

Even with less competitive prices out there, you should always see what other deals are available before you commit to renewing or buying a new policy.

Price comparison sites such as Compare the Market, Confused.com, GoCompare and MoneySuperMarket allow you to view multiple quotes at a glance. Just remember, not all insurers are on price comparison websites: Which? Recommended Providers Direct Line and NFU Mutual are examples of this.

2. Renew early

You don't have to wait until the last minute to renew and the sooner you do it, the more likely you are to bag the best deal. That's because insurers know customers who have procrastinated on renewing will be anxious to get cover sorted as soon as possible and are more likely to stomach a higher price.

According to comparison site MoneySuperMarket, the best time to get a good deal on your car insurance renewal is 15 to 29 days before your policy end date. Renewing on the last day could see you paying 17% more.

3. Choose annual over monthly

Paying annually rather than monthly will usually work out a lot cheaper.

Insurers tend to charge monthly payers interest, which means the policy will be more expensive overall compared to paying upfront.

If you are unable to pay a lump sum, an interest-free credit card could help. It allows you to make an upfront purchase for the entire year and spread the cost without attracting interest.

4. Keep mileage down

Keeping your mileage in check keeps the cost of cover down. Try to limit the miles you clock up over the year if you can.

But be honest about it. Lying could lead to your policy being invalidated.

5. Change your job title

Your occupation can also impact the price. That's because insurers consider some jobs more risky than others.

For example, GoCompare found taxi drivers, barbers and even librarians paid the most for their car insurance, while scientists, nursery workers and college lecturers had the cheapest policies. 

One trick to get around this price hike – without lying – is to try to tweak your job title. For example, instead of 'barber', try saying 'hairdresser' or 'hair stylist'.

6. Haggle for a better price

If you don't want to switch to another insurer, you might be able to get the price down by haggling. 

We surveyed 14,408 Which? members who renewed or switched car or home insurers between May 2021 and June 2022. Of the members who discussed their premium with their insurer, 48% were able to get their price reduced.

7. Be careful who you add to your policy

If you want to add a friend or family member as a named driver to your policy, be warned. 

While adding an older, more experienced driver to your policy can sometimes reduce your annual premium, including someone younger who doesn't have a clean licence and claims history can have the opposite effect.

• Find out more: how to find cheap car insurance

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