Important Disclosure: The content provided does not consider your particular circumstances and does not constitute personal advice. Some of the products promoted are from our affiliate partners from whom we receive compensation.
If you require any personal advice, please seek such advice from an independently qualified financial advisor. While we aim to feature some of the best products available, this does not include all available products from across the market. Although the information provided is believed to be accurate at the date of publication, you should always check with the product provider to ensure that information provided is the most up to date.
Table of Contents
The average comprehensive motor insurance premium cost £511 in the second quarter (April to June) of 2023, according to the Association of British Insurers (ABI). It marks a 7% rise compared to the previous quarter (January to March) and a 21% rise on the same quarter in 2022.
Drivers renewing their current car insurance in the second quarter of 2023 faced an average premium of £471, which was a rise of £36 from quarter one.
However, how much car insurance will cost each driver depends on a number of factors. These include conditions in the insurance market, the wider economy and the cost of repairs. However, although these factors are outside of your control, there are a number of steps you can take to keep the cost of car insurance to a minimum. More on this, below.
How are car insurance premiums calculated?
How much you pay for car insurance is known as the ‘premium’. This will be quoted as an annual figure, although there is usually the option to pay for insurance monthly.
When calculating how much to charge you, insurers look at your vehicle and your personal circumstances and driving history.
Insurers use this information to assess how likely it is that you’ll need to make a claim and how much that claim might be. The more likely you are to claim – based on their realms of historical data – and the more that claim is predicted to cost, the more you’ll pay for car insurance.
According to data from the trade body the Association of British Insurers (ABI) the highest proportion of claims on motor cover are for personal injury (30%), followed by damage to the driver’s vehicle, as the following table shows.
How much is car insurance?
How much a driver will pay for insurance depends on a broad range of factors, including, among other factors:
- Their age
- Make and model (value and engine size) of the car
- Years they have been driving
- Years of no claims
- How much they drive each year
- The type of cover – third party or fully comprehensive.
The average comprehensive motor insurance premium was £511 in the second quarter (April to June) of 2023, according to ABI figures. This was a 7% rise compared to the previous quarter (January to March).
Drivers renewing their car insurance in the second quarter of 2023 faced an average premium of £471, showing a rise of £36 from quarter one, according to ABI figures. The average cost of a new car insurance policy also climbed by £21 to £566.
Which cars are cheapest to insure?
The car insurance industry puts cars into groups based on factors such as their performance capabilities, safety and security features, and the cost of replacement parts.
Assuming everything else is equal, a group 1 vehicle would be the cheapest vehicle to insure, while a high performance, high value vehicle in group 50 would be the most expensive.
Cars in group 1 include the Fiat Panda, Ford KA+, Skoda Fabia Hatchback and the Citroen C1 Vibe. Cars in group 50 include the Bentley Flying Spur, BMWi8 and the Jaguar XE.
Within these groups, the age and value of your car will also affect the premium you’re quoted.
If you make modifications to your car such as adding a noisy exhaust or souped-up engine, this will increase your insurance costs. A car alarm or immobiliser, on the other hand, will lower the cost
How does my driving history affect car insurance?
Car insurance premiums in the UK are based on the ‘main driver’ for each car. To calculate your premium, the insurer will ask questions about your driving and claims history.
If you don’t cause any accidents or make a claim on your insurance, you’ll earn a ‘no claims bonus’ which will qualify you for discounts on future premiums.
The no claims discount can be transferred between insurance companies, and you could get up to 75% discount on typical prices if you manage to stay claim-free for five years or more.
Insurers also look at any driving convictions and endorsements on your driving license. You’ll pay more for insurance if you have points for speeding on your license, while a conviction for drink-driving or death by dangerous driving will see your costs go up significantly.
The majority of drivers (70%) agree with risk-based pricing for car cover, according to the ABI, and feel that those who pose the greatest risk of a claim should pay a higher premium.
What else affects the cost of car insurance?
When you apply for car insurance, the insurer will ask you a range of questions to calculate the risk and your premium. These include your age, marital status, where you live, and your job.
Young drivers typically pay more for insurance. This is because inexperienced drivers are more likely to be involved in accidents. Although they make up only 7% of UK license holders and drive less than average, drivers aged 17-24 are responsible for 24% of all fatal collisions, according to ABI data.
Statistically, married people are less likely to claim on their car insurance than singletons, so expect to pay more for car cover if you live alone. However, adding a second driver with a good driving history, a parent, for example, can lower your premium.
Insurers’ statistics also show that certain professions are more likely to claim on their car insurance than others. Professional footballers are seen as high risk for example, while people who do clerical jobs are considered safer drivers.
By law insurers can’t price car insurance premiums based on gender anymore. But figures from insurer Admiral’s car insurance price index from August 2023, show that on average men do pay more for their cover (due to other risk factors pushing up costs) at £1,150.79 per year, compared to £1,003.87 on average for women.
The following table shows how age is one of the biggest factors in car insurance pricing. Those under the age of 25 pay almost four times more, on average, than drivers aged 50 and over.
First, you’ll be asked to estimate how many miles you drive each year. Then you’ll need to say what you use your car for – social, commuting or business (or any combination of these).
If you don’t use your car for business purposes or getting to work then just tick “social” and your premium will be cheaper.
Insurers will also ask questions about your driving habits when deciding how much to charge you for cover.
Does where I live impact car insurance?
Drivers in some parts of the country will pay more for car insurance than others. This is because insurers look at traffic trends, accident claims and crime data where you live when calculating premiums.
They will also want to know where you keep your car at night. Parking it in a garage or in a private car park will result in cheaper insurance than if you just leave it on the road outside your house.
The data in the table below shows that London is the most expensive area for car cover, on average, while the South West region tends to be the cheapest:
What’s the excess?
When you ask for a car insurance quote you will be asked what level of excess you want to pay. There will usually be a compulsory excess, but you can add a voluntary amount too.
The “excess” is the amount you will have to contribute to any repair or claim before the insurance kicks in. The higher the excess the less chance the insurer will have to pay anything at all so the lower the premium.
But if you opt for a high excess consider whether you could really afford to pay this amount in the event of an accident.
How can I get cheaper car insurance?
It’s important to shop around and compare quotes before buying car insurance. The cheapest insurer for one driver might be different for another driver with a different car.
If possible, pay your premium upfront in one payment. If you opt to spread payments and pay by monthly direct debit instead, you’ll be charged interest which can add up to a third onto the quoted price.
Forbes Marketplace Operations is an Introducer Appointed Representative (IAR) of Seopa Ltd.
Frequently Asked Questions (FAQs)
Why has my car insurance gone up?
Your car insurance premium might go up at renewal if you’ve made a claim in the past year or your circumstances have changed, such as you’ve moved house, changed your car or if you’re driving more miles.
However, sometimes premiums rise at renewal when nothing has changed and you haven’t made a claim. While this can feel frustrating, the increased costs are likely to be a result of inflationary pressures on the insurer. According to the ABI there has been a 33% rise in vehicle repair costs in the year to the second quarter of 2023, for example.
This is why it is important to shop around at renewal and not just stick with your existing insurer. By comparing cover across the market you could cut your premium, or if you’re offered lower priced cover elsewhere you may find your existing insurer will agree to match it.
Which is cheaper: monthly or annual car insurance payments?
It is typically cheaper to pay for your insurance annually, upfront in one lump sum at the start of the cover. Most insurers will offer the option of paying monthly over the course of the year, but while this may help with budgeting it will usually work out more expensive overall.
This is because effectively you’re being loaned the money by the insurer and you’re paying it back in monthly instalments, with interest on top.
Another factor to consider is that when you pay monthly you will be entering into a credit agreement with the insurer and it will carry out a credit check on you.
When is the best time to get car insurance?
Research has found that car insurance quotes on comparison websites tend to be cheapest at around three to four weeks before your renewal date. This is because insurers will try to entice you into buying their cover at this point.
If you leave it later, and closer to your renewal, insurers know you have to buy cover so there is less incentive to keep prices low.
What is car insurance auto-renewal?
An auto-renewal is when your existing insurer automatically renews your cover for another year. This happens if you don’t switch away to a different insurer, or inform your current insurer that you are cancelling the cover.
You are not obliged to stay with your insurer just because it offers auto-renewal. Always shop around and compare your renewal quote to other insurers in the market to ensure you’re getting the best deal for you.
