Car insurance premiums are at their highest-ever level, with the average driver now paying £776 a year.
Motor cover has risen in price by 18 per cent in the last three months, making it one of the most expensive household bills, according to comparison website Confused.com.
Confused.com worked out this figure after analysing 6million car insurance quotes.
Price comparison: Car insurance is now one of the top bills faced by hard-up households
However, the £776 figure is the average quoted price, not the average premium drivers actually pay.
This is because the premium a price comparison website calculates can change by the time a driver buys the policy, for example if they buy additional cover – but the data gives a good snapshot of current cover costs.
Confused.com said car insurance is now the third highest household bill behind council tax and energy.
The average household pays £2,074 a year for energy bills, according to regulator Ofgem.
Why are car insurance premiums rising?
The main reason is increased repair costs. One of the biggest expenses for insurers is claims.
During the pandemic, fewer cars were on the road. As a result, car insurance premiums fell, as there were fewer crashes to pay out for.
With a surge in driving after lockdowns ended, insurers face more claims.
Not only that, but the cost of recent car insurance claims has soared.
Crash the party: Increased repair costs after accidents are bumping up all car insurance costs
Car repairers have faced a big hike in their costs, which they have passed on to insurers, and in turn to drivers.
For example, repairers have seen a 300 per cent rise in energy bills compared to before the cost of living crisis began in 2021.
The cost of providing a courtesy car has risen 30 per cent, and paint and part prices by 16 per cent.
The Association for British Insurers trade body reported a 33 per cent rise in the cost of vehicle repairs in the previous three months.
Louise Thomas, motor expert at Confused.com, said: ‘Car insurance has quickly become one of the biggest expenses for drivers. If prices continue at this rate then there’s no doubt drivers could be priced off the road, as they battle with other rising costs too.
‘But what we do know is that many drivers were able to save some money when it came to renewal. And shopping around was the key to this. Even if prices were cheaper for them, the price they saw online was still significantly cheaper.’
Are all drivers seeing price increases?
While the average cost of car insurance in the UK has reached £776, there are some drivers that will be paying much more.
The price paid varies quite a bit, based on a driver’s gender, location and age.
For example, the average premium for male drivers is now £827. This has increased by £236 (40 per cent) in the last year, and £125 (18 per cent) in the past three months.
In comparison, female drivers are now paying £690, following a £198 (40 per cent) increase year-on-year, and £107 (18 per cent) over the quarter.
Similarly, a driver’s location has a huge bearing on their price, with some now paying over £1,000 for their car insurance.
A £299 (42 per cent) increase in prices in Outer London has put the average premium in the region at £1,003.
However, Inner London remains the most expensive region in the UK, with the average driver now paying out £1,257.
Meanwhile the average insurance cost in the South West is £509, despite a £136 (36 per cent) increase over the year.
How to save money on car insurance
Shop around
This is the number one way to save on car insurance. Drivers can make savings of hundreds of pounds if they shop around when renewing their cover.
Insurers are no longer allowed to charge renewing customers more than new ones. That means 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 monitor your driving, either a separate device or using the driver’s smartphone. These are designed to reward those who drive carefully.
They can cut premiums substantially once you start proving you are a good driver. Some insurers even offer an upfront discount if you take out a telematics policy.
Be careful about named drivers
Another way to cut premiums is to ensure that only regular drivers are named on the policy.
Adding a young, inexperienced driver can be a false economy, especially if you have a large or higher-powered vehicle.
The premium will be affected by the youngest driver, and he or she may not have a no-claims bonus.
Pay yearly if you can
When taking out a new policy, drivers will be given the option to either to pay for the whole year upfront or in monthly instalments.
Many opt for the monthly payments as it means not having to part with a large sum of money in one go – but if you can afford to pay your yearly premium upfront, you could save money.
This is because your insurer may charge you interest on the monthly instalments. It is worth asking them if there is a difference and, if so, what it is.
Only pay for what you need
Some car insurance deals include extra benefits, such as a courtesy car, windscreen cover, breakdown cover and motor legal protection.
All of these could definitely come in handy, but they will almost always increase the total cost of insuring your car.
Many consumers who buy add-on insurance then forget they have it, and some deals are only claimed on once every 664 years.
