Car insurance costs hit an all-time high of £511 a year – how to get the best deal

The average driver now pays £511 a year for insurance, a record high according to official data.

According to the Association of British Insurers, the price of typical car cover increased by 7 percent, or £39 a year, from the first three months of 2023 to the second quarter.

The trade association said the average premium paid by motorists renewing their cover increased by £36 to £471, while the average premium for a new policy increased by £21 to £566.

The distinction reflects the different risk profile of new and renewing customers. For example, a new customer is more likely to be a younger, less experienced driver.

The ABI monitored the price of 7 million car insurance policies to determine the averages, which refer to premiums actually paid, not stated.

Premiums rise because car insurers pass on their own costs. In the first quarter of 2023, insurers paid out £2.4 billion in car claims, up 14 per cent in a year.

Meanwhile, vehicle repair costs are up 33 per cent over the year compared to the first three months of 2022, to £1.5 billion.

This reflects rising costs, including utility bills, and the cost of more expensive repairs.

The ABI said the cost of replacement parts for many popular cars has risen between 12 and 21 percent over the past year.

Auto repairers have experienced a significant increase in their costs, which they have passed on to insurers and, in turn, to drivers.

For example, repairers saw energy bills increase by 300 percent compared to before the cost of living eruption in 2021.

The cost of providing a replacement car has risen by 30 percent and the prices for paint and parts by 16 percent.

Mervyn Skeet, ABI director of general insurance, said: ‘With many families facing a higher cost of living, no one wants the cost of their car insurance to rise.

“Insurers remain committed to ensuring motor insurance remains as competitively priced as possible, but this is becoming increasingly challenging given the continued rising costs they face.

“We recommend that anyone concerned about being able to afford their insurance to talk to their auto insurer to see what options are available.

“And despite cost pressures, it can still be worth shopping around to get the policy that best meets your needs at the most competitive price.”

How to save money on auto insurance

Shop

This is the best way to save on car insurance. Drivers can save hundreds of dollars if they shop around when renewing their coverage.

Insurers are not allowed to charge renewing customers more than new customers. That means that if a driver renews, they should be quoted the same – or less – than if they had started a new policy with the same insurer.

But it may still be possible to get a better deal by shopping around.

Consider black box telematics insurance

Black box policies are where the insurer uses a system in your car to track your driving, either a separate device or using the driver’s smartphone. These are designed to reward those who drive carefully.

They can significantly reduce premiums once you start proving you are a good driver. Some insurers even give a discount in advance if you take out a telematics policy.

Be careful with named drivers

Another way to lower premiums is to ensure that only regular drivers are named on the policy.

Adding a young, inexperienced driver can be a false savings, especially if you have a large or more powerful vehicle.

The premium is influenced by the youngest driver and may not have a no claims discount.

Pay annually if you can

When taking out a new policy, drivers are given the choice to pay for the whole year in advance or in monthly installments.

Many opt for the monthly payments because it means you don’t have to part with a large sum of money all at once, but if you can afford to pay your annual premium up front, you can save money.

Your insurer may charge you interest on the monthly installments. It’s worth asking them if there’s a difference and if so, what it is.

Only pay for what you need

Some car insurance policies offer extra benefits, such as a replacement car, windscreen cover, breakdown cover and legal assistance for motor vehicles.

All of these can certainly come in handy, but they will almost always increase the overall cost of insuring your car.

Many consumers who buy supplemental insurance then forget they have it, and some deals are only claimed once every 664 years.