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05 Mar 2021
Jamie Gibbs Alice Campion

Car insurance: why has the price gone up?

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Here’s how different factors can affect the price you pay on your premiums. 

Your car insurance renewal quote has come through, and the price has gone up. 

But as far as you’re aware, nothing’s changed with your driving habits, so why the rise in price? 

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Why has the price of my car insurance gone up? 

There are two main reasons that could explain why your insurance price has gone up. 

Sometimes it can be due to economic circumstances, which you can’t really do much about. Then there’s risk factors, which you might be able to influence. Let’s examine these in more detail: 

 

Economic reasons 

The first is insurance premium tax. This is a tax that the government charges to all insurance policies.

Between 2015 to 2017, it rose from 6% to 12%. According to the Association of British Insurers (ABI), the tax added an extra £25 to car insurance policies. 

Next up is serious injury compensation, or the Ogden rate. When people make a serious injury claim such as whiplash, they receive a pay-out.

The Ogden rate is used to work out how much compensation is paid out. This can go up or down and affect the price of your insurance. 

And finally, there’s uninsured drivers. If you’re hit by an uninsured driver, you may be able to claim for it through the Motor Insurance Bureau (MIB).

This impacts on other drivers’ insurance costs, as the MIB recoups the money by raising the premiums of law-abiding drivers. 

READ MORE: Car insurance price index

 

Risk factors 

Insurance is based on risk, so if an insurer thinks you’re high-risk, they’ll probably charge a higher premium. 

For example, if you’ve got points on your licence, you’ll see a rise in premiums as insurers believe you are a higher risk. 

But the risk factors aren’t always obvious. Where you live or even your occupation could affect how much you pay. 

As mentioned, some factors are easy to change, others not so much. 

Here are a few examples of the factors that could affect your insurance: 

 

Car accidents 

Accidents, whether they’re your fault or not, will affect the price of your insurance. 

If you were at fault in an accident your premium may rise significantly, so be prepared for this. 

Generally, if accidents on the road increase, insurers might put premiums up to balance having to pay out. 

 

Criminal convictions 

It’s likely that if you have a criminal conviction, your premium will go up. This is because you’re seen as high risk to insurers. 

If you’ve got an unspent criminal conviction, motoring-related or not, you should declare it to your insurer. 

You only need to declare unspent convictions. You should declare spent convictions if you’re asked though. 

Read our guide on motor insurance for convicted drivers for more information.

 

Points on your licence 

Your insurance is likely to go up if you’ve got points on your licence. 

Some points can stay on your licence for four years or more depending on the severity. 

Make sure you mention any points on your licence and the reason for them. If you don’t disclose them, your insurer may not pay out if you need to make a claim. 

 

Car modifications

Thinking of painting your car red? It could cost you more to insure. 

Whether you’re giving your car a lick of paint or adding a new spoiler, it’s classed as a modification

Even something as simple as a tow bar could add to your premiums. 

Modifications can make cars more attractive to thieves, which increases their risk of being stolen. 

Other modifications can increase the speed and power of the car, which puts you at more risk of being involved in an accident. 

It’s always worth shopping around to see if you can get a good deal on your insurance. Some insurers offer insurance specifically for modified vehicles. 

 

Your occupation 

Insurance providers will have a list of jobs with associated risks. Certain jobs carry more risk. 

Insurers will have data attached to each type of occupation. So, one job might be higher risk than another one, even if the job doesn’t involve driving. 

Don't try and edit your job title just for cheaper premiums. If you’re caught, your insurer may not pay out if you need to claim. You may also find you won't be able to get cover in the future.

 

The car’s value 

You’ll usually pay higher premiums for your car if it’s more valuable, as the parts can be more expensive to repair or replace. 

There’s also more risk of expensive cars being stolen. 

Read our tips on how to get cheaper car insurance for more ways to save.

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