Why has car insurance gone up and what can I do to cut costs?

DRIVERS are feeling the pinch when it comes to insuring their car in another blow to people struggling with high prices.

Food, energy and other essential costs are going through the roof and many of us are having to tighten the purse strings.

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Another way people are feeling the pinch is with car insurance, which is also on the rise.

Data from the Association of British Insurers (ABI) shows that on average drivers taking out insurance in January, February or March paid £478 for an annual policy.

It means premiums have gone up by 16% from the same period last year – faster than inflation.

Car insurance costs have shot up to their highest rate since quarter four in 2019, when drivers were shelling out an average £483.

Compare the Market analysis showed premiums have risen for all drivers – up an average £105 a year.

And according to Office for National Statistics (ONS) data, car insurance outweighed CPI inflation, standing at 43.1% in comparison to 8.7%.

Why is car insurance more expensive?

Insurers blamed the pandemic and high inflation.

Global lockdowns caused major supply chain disruption and created a shortage of microchips needed to build new cars.

It put the brakes on supply and pushed up demand for pre-owned vehicles, pushing prices higher.

Repair costs including materials, wages, and energy have also lead to higher car insurance premiums.

How can I cut back on my car insurance?

If you’re struggling with your car insurance there are things you can do

Save the date

Knowing the exact date to renew your car insurance could save you some cash.

That’s because your insurance will most likely be more expensive the close you get to the renewal date as opposed to slightly earlier.

Ryan Fulthorpe, car insurance expert at Go Compare, said you can buy a premium up to 29 days before the policy start date and “lock in” the price you’re quoted that day.

The closer you get to the renewal date of a policy, the more money you’re likely to spend.

He said: “Go Compare data shows that the closer to the renewal date you get, the more you could end up paying.

“Our customers saved over 44% on average by buying their car insurance 27 days before their renewal date, compared with those renewing on the day.”

So if your policy is due to end on August 1, for instance, then you should look at renewing it on July 5 before the cost starts rising.

With the average cost of a renewed premium standing at £436 at the start of the year, employing this trick could save you over £191.

Remember though to compare costs to find the cheapest deal too.

Pay annually if you can

Paying for your car insurance annually could help you save money as you won’t be paying interest.

Short-term car insurance provider Cuvva found that a young driver could be charged around £5,278 for an annual bill with Churchill, but £5,806 monthly, with a 29.40% interest. That’s a saving of £527.

If you can afford it, pay your insurance upfront. 

Of course, make sure you’re able to pay the payment in full and if you were to use a credit card, ensure you can pay it back on time to risk interest being added.

Improve security

If your car is stolen and you have to make a claim, your premiums will go up. 

Improving your car’s security could prevent a theft from happening in the first place. 

Bike locks, alarms and immobilisers could ward off robbers.

You could prevent your insurance rising by a third saving you money in the long run.

A third of insurance could be anywhere from £100 to £1,000 but a secure bike lock will set you back between £30 and £133.

Check your job

Another way that insurance costs can be impacted is by how you explain your profession on your application.

Go Compare found swapping your role from “builder” to “construction worker” can save you £5 a year.

Tweaking”chef” to “caterer” can save you £20.

Changing your role from “fast food delivery driver” to “delivery driver” could save you £40. Make sure the description is still accurate though.

Add an experienced driver

According to Brake, one in five drivers crash within a year of passing their test and more than 1,500 young motorists are killed or seriously injured on UK roads every year.

Insurers generally charge higher premiums to younger drivers for this reason, because they are seen as more risky to cover.

But you can add another person to your premium, such as a parent, and drastically reduce what you’re quoted.

Kara Gammell, finance expert at comparison website MoneySuperMarket, said: “It is not always the case, but adding an extra driver to your car insurance policy can reduce the cost.

“This is generally useful for younger drivers, particularly for those who have just passed their test and are considered a ‘high risk’ to insurers.

“Adding someone who has more driving experience, no previous claims and is considered a much lower risk can bring down the average risk, meaning you are likely to be offered a cheaper policy – in some situations this could save you £100s.”

While adding a named driver to your policy is a great way to cut costs as premiums rise, you will want to steer clear from “fronting”.

This is the car insurance term for when someone, often a parent or older driver, falsely claims they are the main driver of a vehicle when it is someone younger, or more inexperienced.

Kara warned: “Policies for young motorists can be eye-wateringly expensive, so it’s easy to see why fronting would appeal.

“However, it is illegal, and if an older motorist is falsely naming themselves as the main driver of a car then the insurance policy can be invalidated and the driver could even find themselves charged with a criminal offence.

“Whatever the situation, check how much it could cost in administrative fees to add a named driver and what excess they’ll pay if they should need to make a claim.”

Do I need car insurance?

It’s a legal requirement if you own and drive a car.

Car insurance offers you financial protection if you are in an accident, with three different levels of cover available.

You can opt for a fully comprehensive, third party or third party, fire and theft policy.

Fully comp policies are the highest level of protection and cover you, your car and anyone else involved in an accident – that makes them the most expensive.

The lowest level is third party, which is the legal minimum you must have.

It covers you for the costs of injury or damage caused to other people or their property.

However, you don’t get any protection if your own car is damaged or stolen.

You can pay for your car insurance in one lump sum ahead of the 12-month policy, or in monthly instalments.

Insurers then reward you if you make no claims in this period by, generally, lowering your premium for the next 12-month period.

This is called the “no-claims bonus” and can see your premium drop by 30% after one year to 65% or more after five years.

That said, many drivers have still been seeing their premiums go up in recent months despite making no claims or having a change in circumstances.

This is due to, among other factors, energy inflation and the rising cost of carrying out vehicle repairs being passed on to consumers.

Do you have a money problem that needs sorting? Get in touch by emailing [email protected].

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This post first appeared on thesun.co.uk