Car insurance costs have hit a record high, with some electric vehicle drivers paying over a third more than petrol or diesel alternatives.
The annual cost to insure a Tesla Model Y is £1,421, according to comparison site Confused.com, while the equivalent petrol option, a Vauxhall Mokka, costs just £449.
Prices have soared over the past year, in part due to the high cost of covering electric vehicles but also the added pressure of inflation.
Now the average cost of car insurance has increased by 58 per cent in just 12 months, the equivalent of an additional £338 per person.
The average driver is now paying £924, breaking records once again as prices continue to grow, according to six million quotes analysed by Confused.com.
Why is car insurance becoming more expensive?
There are many reasons why car insurance prices are increasing so rapidly. Adjusting to life after the pandemic and recent industry changes have both had a huge knock-on effect on how much drivers are paying.
Inflation is also a major contributor. The Association of British Insurers said the cost of vehicle repairs increased by 33 per cent over the year to £1.5bn, reflecting rising costs, including energy inflation.
Although inflation has been high for two years, there is a lag in the impact being felt – because of supply lines and pricing for parts happening in advance – which is why drivers are only now seeing higher bills.
The rise of electric vehicles (EVs) has also had an impact. They continue to grow in popularity with some manufacturers even announcing they’ll only manufacture EVs going forward.
However, they often come with a hefty price tag. These tend to have more sophisticated machinery and are therefore more costly to repair. The higher cost of repairs is being spread across the board to motorists as opposed to just EV owners.
Another factor is the “loyalty premium” ban – in January 2022 the Financial Conduct Authority (FCA) banned car and home insurance providers from charging existing customers more to renew their policies.
This has led insurers to increase the prices of their core products to make them more profitable.
There are also lots more drivers returning to normal driving habits since the pandemic, so naturally there are more drivers on the road. This means claims frequency is increasing, so insurers are paying out more than they have in recent years.
Louise Thomas, motor expert at Confused.com car insurance, said: “For another consecutive quarter, we’ve seen some of the highest inflation rates when it comes to car insurance. Drivers are likely to be paying more than ever. So those who haven’t yet been affected should be wary of how pricing may affect them at their next renewal.”
Where is the most expensive place to insure?
In the past three months alone, insurance has increased by 19 per cent which adds £148 to the average bill.
Perhaps unsurprisingly, inner London is the most expensive region in the UK, with the average prices now £1,503 – up £567 (61 per cent) in 12 months.
In Outer London, prices are now £1,187, on average, following a £446 (60 per cent) annual increase.
Outside London, drivers in Manchester and Merseyside are seeing annual increases of around £417 (57 per cent), making average prices £1,154.
Meanwhile, in the West Midlands, the cost of car insurance is £1,139, on average, following a £442 (63 per cent) increase.
How can you save on car insurance?
There are still ways you can cut costs on your car insurance.
● Pay for your car insurance annually: If you can afford it, paying for your insurance in one go rather than monthly is one way to get cheaper car insurance. That’s because insurance companies often charge interest for spreading the cost of your cover over the year.
● Increase your voluntary excess: This can help you get cheaper car insurance. But you need to make sure you can afford to pay it, if you need to claim.
● Be accurate with mileage: Generally, the more miles you drive, the more likely you are to have an accident and make a claim. This means the higher your mileage, the more you pay for your car insurance. Driving fewer miles can be a great way to save money on your car insurance policy. But don’t assume that a low mileage always means low prices. If you barely drive at all, your insurance company could see that as a risk as well.
● Enhance your car security: The harder it is to steal your car, the less of a risk it is. This usually means cheaper car insurance. There are several ways to improve your car security including installing a Thatcham-approved car alarm or immobiliser, if it doesn’t already have one. Adding secondary levels of security such as a steering lock can also help as does parking overnight in a secure, well-lit car park, or at home in a garage or driveway, if possible.
● Use a price comparison site: If you’ve had a higher renewal quote, the best thing you can do is compare prices. That way you can ensure you’re getting the best deal to suit your needs and not paying more than you need to. And it’s likely that you can make a saving.
