Car insurance prices increased by 3% in Q4 2023, reversing the decline seen in the previous quarter, according to Go.Compare Car Insurance.
However, despite the recent rise, premiums remained 3% lower than they were a year ago. The latest data shows that the median cost of a car insurance policy between October and December 2024 was £450, up from £437 in the previous quarter.
According to a report from the House of Commons, the increase in car insurance costs can largely be attributed to the rising expenses of vehicle replacements and repairs, as well as the broader impact of inflation and rising energy costs.
In response to these financial pressures, insurers have been passing on the additional costs to customers, resulting in higher premiums.
The type of policy a driver chooses has a significant effect on the cost of their car insurance. Surprisingly, third-party-only (TPO) insurance, which provides the most basic level of coverage, is often more expensive than third-party, fire, and theft (TPFT) policies.
The average annual cost of TPO insurance is £588, whereas TPFT coverage costs an average of £440.
Fully comprehensive insurance, traditionally expected to be more expensive, has an average premium of £450, making it a cost-effective option with more extensive protection.
Age was another major factor in determining car insurance costs, with younger drivers paying significantly more than older ones.
The median premium for drivers aged 17 to 24 is £900, reflecting the increased risk insurers associate with less experienced motorists.
In contrast, drivers aged 50 and over paid a median premium of just £384, a 57% decrease compared to younger policyholders.
Certain jobs were associated with lower premiums, with ambulance controllers paying an average of £296, artists £324, and farmers £333.
Other professions that tend to receive lower quotes included bank clerks, engineers, and gardeners.
Urban areas, particularly those with higher crime rates, often lead to more expensive premiums. Car insurance in Greater London costs a median of £642 per year, which is 75% higher than the median cost in Wales, where premiums average £365.
Drivers who covered 6,000 miles per year paid a median of £444, whereas those driving 10,000 miles face a higher cost of £488.
Additional elements influencing premiums included driving history, the length of time a person has held a license, and the presence of a no-claims discount.
Industry experts advised drivers not to automatically accept renewal prices, as insurers may increase premiums based on factors beyond personal circumstances, such as rising inflation and higher repair costs.
Data suggests that motor insurance deals are now around £100 more expensive than in 2022, making it increasingly important to shop around for the best deal.
Paying annually instead of monthly can also save money, as monthly payments typically involve interest charges. These interest rates can be particularly high, making an annual lump sum payment the cheaper option in the long run.
As car insurance premiums continue to fluctuate, staying informed and comparing options remains the most effective strategy for securing the best deal.
Tom Banks, spokesperson for Go.Compare Car insurance, said: “The cost of car insurance rising once again really isn’t going to be welcome news for drivers, especially as they continue to feel the effects of the cost of living crisis on their household finances.
“It is good to see prices have fallen 3% overall in the last year, but understandably, it’s important to consumers that they are still making savings where they can and getting a policy with everything they need for the best price.”
Banks added: “Being aware of the factors which could impact your premium is a good place to start. Whether that is your location, age or mileage.
“These aren’t always things you can change – moving house simply to get a cheaper policy isn’t something we would suggest. But there are a few things you can do to make sure you are getting the best deal. Here are our top tips:
“Think about when you buy: Our data shows that purchasing your premium 26 days before your policy is due for renewal could save you some money, especially compared to purchasing it on the day it is due for renewal.
“Be accurate with your mileage: How far you drive every year is another factor that could impact your premium cost, so be as accurate as you can. If you aren’t sure how far you drive each year, take a look at your MOT certificate – it will show your car’s mileage at the last few tests.
“Opt for annual payments: If you can, paying annually for your car insurance policy could help you to save money. If you are paying monthly, your insurer treats this as a loan and will be charging you interest.
“Job descriptions matter: If there are multiple titles you can use to describe your profession accurately, try them all out, as your car premium could vary depending on which you use.”
