What's happening to car insurance premiums?

The average cost of car insurance rose by 2% in April to June 2024, compared to the previous three months. That's according to the latest quotes-based data from GoCompare.

The comparison site figures follow a slightly more optimistic report from the Association of British Insurers (ABI). Its numbers – which are based on actual prices paid by drivers – showed average premiums fell for the first time in two years in the second quarter of this year.

So what's going on? Here, Which? delves into the cost of car insurance and explains how to pay less.

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What's happening to car insurance prices?

The ABI's latest figures show the average car insurance premium now sits at £622, down 2% from £635 in the first three months of 2024. It's the first time the quarterly average premium has fallen in two years, having increased 1% between the final quarter of 2023 and first quarter of 2024.

Published every three months, the ABI's data gives the most accurate picture of the market as it's based on actual prices paid by drivers (as opposed to just quotes), and covers both new customers and those renewing existing policies.

Its most recently published year-on-year analysis found that the average amount paid by drivers in April-June 2024 was 21% higher than in the same quarter last year.

The chart shows how the average cost of a car insurance premium has risen since January 2022:

Comparison sites publish data as well, but their figures only reflect quotes given to customers searching for home insurance.

Unlike the ABI's findings, GoCompare numbers show the average premium rose between the first and second quarter of 2024 – jumping 2% to £456. It follows a 3.8% fall between the final quarter of 2023 and first quarter of this year.

Prices are also significantly higher than they were this time last year. The most recent GoCompare data showed that compared to the same period in 2023, the average cost of car insurance is up 23%, from £371. 

• Find out more: best car insurance companies

Some drivers paying far above the average

Customers who choose to pay monthly are likely to be paying even higher prices, thanks to the sky-high interest rates charged by insurers.

Sales data examined by Which? earlier this year revealed that, as of last September, drivers paying monthly were forking out over £300 more on average than those who paid in one go. 

Drivers who choose to spread payments tend to be younger and/or less wealthy, leading the Financial Conduct Authority's head of insurance to describe insurers' interest rates as 'a tax on being poor'.

Which? is pushing for insurers' interest rates to be compared in a league table and for the regulator to take action against those not providing fair value.

• Find out more: industry promises to change pay-monthly car insurance – but is it enough? 

Why is the cost of car insurance still so high?

An easing in claims expenses this quarter helped premium prices drop slightly in the second quarter of 2024, the ABI says. But inflationary pressures over the past 12 months continue to be blamed for the sky-high prices customers are still paying to insure their vehicle.

The ABI's latest quarterly figures show the cost of repairs jumped 28% annually. And while the average cost of theft of a vehicle fell 10% to £12,100 year on year, the average cost of theft from a vehicle – for example, stolen parts – hit a record high of £3,100. 

All of these pressures mean insurers are spending more on claims and costs than they're collecting in premiums. ABI data shows insurers paid out £2.9bn in motor insurance claims in the second three months of 2024, up 18% on the £2.5bn paid during the same quarter last year. 

The bleak picture prompted the ABI to put together a 10-point plan to end the recent wave of premium price spikes. The group also launched a set of five new principles aimed at managing the cost of insurance for drivers who pay monthly.

What impacts premium prices?

Location, age and experience all have an impact on premium prices. 

GoCompare data for the second quarter of 2024 shows that Greater London is the most expensive place to insure your car, with premiums costing an average of £662. That is 80% more than the average cost of a premium in Wales (£366), where drivers pay the lowest car insurance premiums in the UK.

The younger you are, the higher the cost of insuring a vehicle. That's because drivers who haven't been on the road for long are considered more likely to be involved in a car accident, so providers up their premiums to account for that increased risk.  

Government figures show that, in 2022, around a fifth of all those killed or seriously injured by collisions in cars involved a young driver. Young male car drivers aged 17-24 are four times as likely to be killed or seriously injured compared with all car drivers aged 25 or over. 

The cost of car insurance also drops over time as the driver gains more experience on the road. Compare the Market's latest research found new motorists paid £771 less after a year of driving.

How much could you save by switching?

Confused.com says loyal customers are facing some of the biggest price increases to their premiums. According to its survey of 2,000 drivers, of those who received their renewal between January and March this year, 75% received a higher renewal price of £94 on average. 

But you can potentially make big savings by shopping around for a better deal. The comparison site found 45% of customers that received a higher renewal quote saved an average of £90 compared to last year simply by switching provider.

A good place to start is by checking out price comparison sites, which allow you to view multiple car insurance quotes at a glance. The main ones for insurance are Compare the Market, Confused.com, GoCompare and MoneySuperMarket. 

But remember, not all insurers are on price comparison websites: Which? Recommended motor insurance providers Direct Line and NFU Mutual are examples of this.

Other ways to keep costs down

Here are a few simple ways you can reduce the cost of car insurance:

• Go annual Paying for a whole year in one go instead of monthly could save you hundreds of pounds.

• Renew early You'll often get a cheaper price if you renew your cover a few weeks (rather than a few days) in advance of the policy's end date.

• Keep mileage down Try to limit the miles you clock up over the year to avoid being hit with a higher premium.

• Tweak your job title Your occupation can also impact your premium. One trick to get around this – without lying – is to try and tweak your job title. For example, instead of 'barber', try saying 'hairdresser' or 'hair stylist'.

• Haggle If you don't want to switch to another insurer, you might be able to get the price down by haggling.  

Find out more: how to find cheap car insurance

This story is regularly updated with the latest figures from ABI, GoCompare and Compare the Market.

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