Car insurance prices rise by 11% for new customers: How to get cheaper cover

Drivers are paying 11 per cent more for new car insurance, taking the average yearly premium to £500, insurer figures reveal. 

Motorists taking out cover with a new insurer paid 11 per cent extra during 2022 compared to 2021, according to the Association of British Insurers (ABI). 

However, drivers renewing existing policies paid 7 per cent less, or £392 on average.

Premiums for drivers are edging up as insurers pass on their own cost hikes to struggling motorists

That is because of rules from the Financial Conduct Authority regulator in January 2022 that banned ‘price walking’ – the insurer practice of charging renewing customers more than new ones.

This led to falling premiums for renewing customers and higher premiums for new ones.

But overall the most up-to-date figures for the final three months of 2022 show an 8 per cent rise in the average motor insurance premium.

ABI senior policy adviser, general insurance, Jonathan Fong said: ‘Every motorist wants the best insurance deal, especially when coping with cost of living pressures, and insurers continue to do all they can to keep motor insurance as competitively priced as possible. 

‘Yet, like many other sectors, insurers continue to face higher costs, such as more expensive raw materials, which are becoming increasingly challenging to absorb.’

Why are car insurance premiums rising?

This is happening for several reasons. The main one is that insurers’ own costs are rising.

For example, rising energy bills mean insurers pay £71.75 extra to repair each car after a crash. The cost of paint and materials has risen by almost 16 per cent, the price of courtesy cars by 30 per cent and around 40 per cent of all repair work is hit by delays.

Another part of the rise in car insurance prices is the UK returning to pre-pandemic norms. 

During the worst of the Coronavirus lockdowns, car insurance prices fell due to insurers paying out fewer claims for fewer journeys.

The UK’s return to a pre-Covid way of life has meant more car journeys, more theft and crashes and therefore higher premiums.

How to save money on car insurance 

There are several ways that drivers can help lower their insurance bills.

If you cannot afford insurance at all, the best thing to do is talk to your insurer. 

The ABI’s Fong added: ‘Anyone concerned about being able to continue paying their motor insurance premium should speak to their insurer about any alternative payment options that may be available.’

Otherwise, here are five ways to help bring down car insurance costs. 

1. Shop around for the best policy

This is the number one way to save on car insurance. Drivers can make savings of hundreds of pounds if they shop around when renewing their cover.

Insurers are no longer allowed to charge renewing customers more than new ones. That means if a driver renews, they should be quoted the same – or less – than if they had started a new policy with the same insurer.

But it may still be possible to get a better deal by shopping around. 

Insurers say the cost of repairing damaged cars is soaring, and must be passed on to drivers

2. Consider ‘black box’ telematics insurance

Black box policies are where the insurer uses a system in your car to monitor your driving, either a separate device or using the driver’s smartphone. These are designed to reward those who drive carefully.

They can cut premiums substantially once you start proving you are a good driver. Some insurers even offer an upfront discount if you take out a telematics policy.

3. Be careful of how many drivers are named

Another way to cut premiums is to ensure that only regular drivers are named on the policy.

Adding a young, inexperienced driver can be a false economy, especially if you have a large or higher-powered vehicle.

The premium will be affected by the youngest driver, and he or she may not have a no-claims bonus. 

4. Pay yearly, not monthly

When taking out a new policy, drivers will be given the option to either to pay for the whole year upfront or in monthly instalments.

Many opt for the monthly payments as it means not having to part with a large sum of money in one go – but if you can afford to pay your yearly premium upfront, you could save money.

This is because your insurer may charge you interest on the monthly instalments. It is worth asking them if there is a difference and, if so, what it is.

5. Only pay for what you need

Some car insurance deals include extra benefits, such as a courtesy car, windscreen cover, breakdown cover and motor legal protection.

All of these could definitely come in handy, but they will almost always increase the total cost of insuring your car.

Many consumers who buy add-on insurance then forget they have it, and some deals are only claimed on once every 664 years.