The cost of car insurance went up by 20% over the past 12 months. The average cost of a comprehensive car insurance policy is now £657 - an increase of £107 over last year. That's according to our car insurance price index, powered by WTW.
But why have these costs gone up, and who's been hit hardest? Let's take a look.
Have car insurance costs gone up in 2023?
During first quarter of 2023 (January - March), drivers paid 20% (£107) more than a year ago. This is the fifth annual price rise in almost 2 years.
Our research also shows a quarterly increase in the cost of car insurance. Prices are £28 higher in this quarter than they were in the previous 3 months.
Why has car insurance gone up?
Car insurance prices saw a steady fall in each quarter in 2021, possibly as a result of shifting driving habits during the Covid-19 pandemic. With more people working from home and fewer commuters, it stands to reason that there fewer accidents and less risk on the road.
In fact, drivers reported cutting their annual mileage by more than 40% during the 2020 lockdown*. And police forces across the UK reported a 26% drop in the number of road accidents they attended.+
As things have more or less returned to normal, there's an increase in road traffic, meaning there's an increased risk of car insurance claims. And this is reflected in how much drivers pay for their car insurance. This could be one of the reasons why car insurance has gone up.
What is the average cost of car insurance?
The average cost of a car insurance policy in the UK is £657.
How have car insurance prices changed over the past few years?
Car insurance costs started to rise during 2019. But then the nationwide shift in driving habits during the pandemic helped to keep prices in check. The return to normality, coupled with the cost of living crisis, has seen car insurance costs rise again.
| Period | Average car insurance cost |
|---|---|
| Q1 2019 | £589 |
| Q1 2020 | £625 |
| Q1 2021 | £538 |
| Q1 2022 | £538 |
| Q1 2023 | £657 |
Insurance ‘loyalty penalty’ scrapped but customers could still save
In January 2022, the Financial Conduct Authority (FCA) stopped insurance companies increasing prices for loyal customers.
Before this change, insurance companies often gave discounted policies to new customers. This usually meant that loyal customers saw higher prices to balance things out.
Insurers haven't been able to penalise existing customers in this way for a year now. But that doesn't mean that you're guaranteed to get a cheaper policy.
We surveyed 2,000 UK drivers that had their car insurance renewal in the last quarter**. The results showed that:
- More than half (55%) who renewed their car insurance policy last quarter saw their prices go up by £53, on average
- Around 2 in 5 (37%) used a price comparison site after seeing a more expensive quote and saved £46, on average
That's why it's still worth shopping around. Even if your renewal isn't as high as you thought it might be, or is only slightly less than the previous year, there are still savings to be made.
Price rises seen across the UK
Car insurance prices have risen across the UK. But some areas have fared worse than others.
Drivers in Inner London, for example, paid £1,067 for their car insurance - a £203 (24%) increase on last year. And those in West Midlands paid £130 (20%) more than last year. They're now paying £787 for their car insurance, on average.
Male drivers pay more than women
Male drivers saw their prices rise more than women. Their car insurance costs were £203 more than last year. They're now paying £702 on average.
Female drivers saw a smaller increase of £96 compared to last year. They're currently still paying less than men for their insurance, at £583, on average.
The EU Gender Directive means insurers can't work out insurance prices based on whether a driver identifies as male or female. But there are other risk factors that mean men could have higher car insurance costs.
For example, male drivers tend to drive more expensive cars, with bigger engines and newer technology. This usually makes for higher-value claims in the event of an accident.
Male drivers also tend to have more motoring convictions than female drivers.
This goes some way to explain the £119 gap in car insurance costs between men and women.
Younger drivers hardest hit
It's widely known that young drivers tend to have much higher insurance costs than older, experienced drivers.
Drivers aged 18, for example, paid £1,845 for their policy, on average - almost triple the national average and £426 (30%) more than a year ago. This is the most expensive age for car insurance.
Some age groups are seeing their prices at the highest they've ever been. Drivers aged 21 saw price rises of £271 compared to a year ago, bringing their costs up to £1,471. And 26-year-olds are paying £1,038, an increase of £152 on the previous year.
When will the cost of car insurance be reduced?
It's often thought that your car insurance costs plummet once you hit 25 years of age. While this isn't always the case - and is one of the more common car insurance myths - at a national level there might be a grain of truth to it.
According to our research, car insurance costs tend to dip below the £1,000 mark once drivers reach the age of 27. Previously, it was at 24 when drivers would see prices below £1,000.
But if you're a younger driver, you don't need to wait around for your car insurance costs to go down. There are several ways you can cut the cost of your car insurance yourself. This includes:
- Shopping around every year for a better car insurance deal
- Ensuring your car is secure with an alarm and engine immobiliser
- Building up a no-claims bonus
- Downgrading your car to a second-hand model, or with a smaller engine
- Considering a black box insurance policy
For more tips, take a look at our guide on how to get cheaper car insurance.
Other motoring costs still high
As well as this ongoing increase in car insurance costs, other motoring costs remain high.
According to our fuel price index, fuel prices had been rising since August 2021, peaking in July last year before starting to come down again. Petrol costs £1.47 per litre, and diesel costs £1.62, on average (prices correct as of 20 April 2023).
You can check petrol prices in your local area and see if you can get cheaper fuel elsewhere. And there are ways you can improve your fuel economy too.
'Don't accept your renewal price'
"Although there are increases for both new and existing drivers, the evidence shows how shopping and switching at renewal can save money. With the average cost of car insurance around £657, drivers might be thinking how they can help to keep costs down."
"As well as using price comparison sites to find the best deals, drivers should also be accurate with information they give to insurers. For example, telling your provider that you drive fewer miles than you actually do doesn’t necessarily mean that you’ll get a cheaper price. If feasible, paying for your insurance annually and having a multi-car policy can also help with the price you pay."
What our motor insurance expert says:
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