Car insurance premiums at record level

The cost of car insurance has hit an all-time high. The Association of British Insurers (ABI) found that levels rose at more than five times the rate of inflation during 2016, as a result of growing tax costs, repair rates and a rise in whiplash claims.

The three reasons sent the average comprehensive policy to £462 in the last quarter, a rise by 4.9%.

The 3 car insurance culprits: why are premiums increasing?

  1. Insurance premium tax
    Since the budget in 2015, there has been three distinct increases to insurance premium tax. The increase has doubled the rate from 6% to 12%.
  2. Rising repair costs
    Cars these days are far more electronically sophisticated than cars of 10 years ago. The complexities and cost of specialist parts and tools to repair modern cars has increased the average repair bill by 32% over the last 3 years, according to the ABI.
  3. Personal injury and whiplash claims
    Changes are to be put in place to the way compensation is calculated for personal injuries –the ‘discount rate’. The rate determines the amount of money that insurance companies can deduct from payouts to injured parties following a claim. However, a lower rate could force insurance companies to pay out more – thus increasing premiums.

Young drivers are expected to see the brunt of the rise - in cases where they pay more than treble the cost than their older peers, could there be a rise in uninsured driving?

Beat the costs

Are you one to auto-renew? Curb your policy costs and find a new quote with our car insurance comparison tool!

Or beat the hikes with our practical 1-minute guide to cutting the cost of your car.

Last updated: Wednesday, 15 February 2017

 
 
 
 

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