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1:00 AM 9th March 2024
cars

Five Reasons Why Car Insurance Premiums Are Rising And What You Can Do About It

 
Image by PublicDomainPictures from Pixabay
Image by PublicDomainPictures from Pixabay
Car insurance prices are at an all-time high, with research showing that the average cost of a premium comes in at around £1,000, 58% higher than it was 12 months ago in the U.K.

On the back of this, accident compensation company Claims.co.uk have examined six tips to reduce car insurance premiums and explained five reasons why costs are increasing right now.

Six expert tips to deal with rising costs

1. Reducing mileage:
Reducing annual mileage is a great way to decrease car insurance costs. Low mileage drivers can consider pay-as-you-go insurance, but insurers may decide not to pay out if they find out this is inaccurate, so it’s essential to be honest from the start.

2. Multi-car policy: Depending on the insurance provider, drivers with two or more vehicles may be able to save money by choosing a multi-car policy. Although this may depend on personal circumstances, driving records and vehicle types.

3. Improved security: Drivers can reduce the cost of their car insurance premiums by improving their security, such as installing an industry-approved alarm or parking off the road in a driveway, depending on the insurer’s policy.

4. No-claims discounts: Drivers can build up a no-claims discount when they don’t claim their insurance. It’s always important to notify insurance companies of any accidents, but drivers may choose to cover costs for minor bumps themselves, and over time, this may reduce costs.

5. Be aware of add-ons: There are multiple add-ons available when signing up for car insurance, such as breakdown cover and legal protection. To reduce costs, see if buying these as standalone policies is cheaper than all at once.

6. Car maintenance: It can be tempting to overlook tedious car maintenance, especially during the cost-of-living crisis. However, taking the time to regularly check tyre pressure, vehicle lights, and oil and coolant levels can save money in the long run by reducing the risk of accidents and, in turn, the need to claim insurance.


Five reasons why car insurance prices have risen

1. Inflation:
Inflation is the leading cause of car insurance premiums rising. Claims can take several months to settle, and the economy can change drastically during this time. For example, research shows that inflation rates stand at around 3% in 2024, and the cost of car insurance has been affected by this.

2. The energy crisis: Energy bills have risen 36% since 2021, according to the House of Commons. In turn, the cost of repairing vehicles has also risen, affecting car insurance premiums.

3. The rising cost of materials and labour: The cost of repairing vehicles has risen 33% since the first quarter of 2022, according to research from the Association of British Insurers (ABI). This, along with labour costs soaring 40% during the same timeframe, has caused the price of car insurance premiums to increase.

4. Delays in the supply chain: In 2023, 77% of mid-sized businesses were disrupted because of supply chain issues. These market delays have gone on to affect the manufacturing industry, for example, prolonging the time cars are being repaired in garages, meaning more courtesy cars being assigned.

5. The ban on loyalty premiums: Loyalty premiums, otherwise known as price walking, allowed companies to offer lower prices to new customers and raise the costs year-on-year. These were banned by the Financial Conduct Authority (FCA) in 2022, meaning that companies must offer higher premiums from the start of a contract, rising prices in 2024.


A spokesperson at Claims.co.uk has commented on the study:
“In the final quarter of 2023, the U.K. entered a recession that has affected all areas of life for people throughout the nation, including increasing the cost of car insurance premiums.

“By following these tips, drivers may be able to reduce the price of their insurance premiums. It may also be worth changing suppliers mid-contract; there may be a mid-term cancellation fee, but many companies offer refunds for any cover that hasn’t been used. However, it’s important to remember that this can forfeit any no-claims discounts for the rest of the year.”


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