The average cost of car insurance in the UK has surged to an all-time high of £924, marking a £338 (58%) increase from the previous year, according to the latest car insurance price index.

This data reflects the most substantial annual rise since the inception of the car insurance price index in 2006. The data was generated in collaboration with Willis Towers Watson, a global advisory, broking, and solutions company.

The increase in car insurance premiums has impacted drivers of all age groups across the UK. The survey, which included responses from more than 6 million drivers, provides a look at the escalating insurance rates.

How much are individual drivers paying?

Notably, urban areas, particularly London, have been hit hard. Drivers in Inner London now face the highest insurance rates, with an average premium of £1,503.

This represents a substantial annual increase of £567 (61%), significantly impacting the wallets of urban drivers.

In Outer London, the situation is not much different. The average car insurance price has risen to £1,187, a 60% annual increase resulting in higher expenses for drivers in this region.

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Drivers in Manchester and Merseyside have also experienced considerable insurance hikes. With average prices reaching £1,154, this region is seeing annual increases of around £417 (57%), adding to the financial strain on drivers.

The West Midlands is another region significantly affected, with an average car insurance cost of £1,139. The annual increase of 63% demonstrates the broader trend of rising car insurance rates.

Age has proven to be a determining factor in insurance premiums. Younger drivers, particularly 18-year-olds, continue to grapple with soaring insurance prices. They now face an average cost of £2,995, signifying an alarming 89% annual increase.
Furthermore, 17-year-olds have experienced a nearly twofold surge in their insurance rates in the past year, with premiums rising by an average of £1,262 (93%) to reach £2,613.

Drivers up to the age of 38 are not exempt from the surging costs, with average premiums remaining above the £1,000 mark. This trend has raised concerns about the affordability of driving for millions in the current economic climate.

The impact of rising car insurance prices is not limited by age. Gender also plays a role, with males facing an average price of £987, representing a 57% annual increase. Women have not been spared either, experiencing a 59% rise in prices, resulting in average premiums of £820.

A recent survey of 2,000 UK drivers revealed that approximately 3 in 5 (63%) of those who renewed their insurance in the past three months faced substantial price increases.

So why are prices increasing?

There are several contributing factors behind the rapidly rising car insurance prices. While the FCA introduced the General Insurance Pricing Practices (GIPP) to ensure fairer pricing, adjusting to post-pandemic life and recent changes in the industry have brought unforeseen consequences.

The surge in popularity of electric vehicles (EVs) due to the government’s ambitious Net Zero plans has significantly impacted the insurance landscape. EVs, often accompanied by higher price tags and advanced technology features, cost insurers more for repairs or replacements.

Supply chain disruptions, driven by the pandemic, have led to backlogs for EVs, and their quicker acceleration speed is perceived as a higher risk by insurers.
Furthermore, the sustained value of second-hand vehicles, particularly since the pandemic, has also played a role. In the event of an accident resulting in a total loss, insurers now face higher payouts.

The increase in drivers returning to normal driving habits post-pandemic has elevated claims frequency, causing insurers to pay out more than in recent years. These combined factors heighten the overall risk, contributing to the surge in car insurance rates.

Louise Thomas, motor expert at car insurance, said: “For another consecutive quarter, we’ve seen some of the highest inflation rates when it comes to car insurance. With prices up on average £148 (19%) in just 3 months, and £338 (58%) in 12 months, drivers are likely to be paying more than ever. So those who haven’t yet been affected should be wary of how pricing may affect them at their next renewal. 

“But there are deals around and drivers can still save money, even if they’ve noticed their renewal has gone up. And in a time of financial uncertainty, this can be really helpful if you’re needing to watch your money more closely than before. So if you’re due to renew, consider ways in which you can keep costs down. Whether it’s reducing your mileage or improving your car security, these can certainly help. But remember to always be truthful to your insurer, otherwise, you risk invalidating your policy.”

Motor insurance ripe for disruption due to embedding