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Why is car insurance so expensive?

One of the biggest costs faced by car owners is insurance. Covering your car for an accident or range of other eventualities can be expensive. To find out more about the cost of car insurance and why it can be so expensive, keep reading.

The cost of claims

Car insurers calculate their prices according to the number of claims made and how much these claims cost. There are multiple factors affecting both the number of claims made and the cost of them.

Technology

Advances in technology have led to a rise in keyless car crime, as well as more costly repair bills.

Fraud

Fraudulent claims cost the industry dearly. According to the Association of British Insurers, £1.3 billion worth of fraudulent claims were discovered in 2016. To put this another way, each week around £25 million worth of fraudulent claims are made. Even when these are detected, the costs of stopping such claims still adds to insurance premiums.

Whiplash

Whiplash is a very difficult one to deal with, as this kind of injury cannot be seen on X-rays or scans. This type of claim is therefore open to abuse, and the number of claims has been rising steeply for over a decade. Measures to limit this are being considered by the government, but to date nothing has been brought into force.

Uninsured drivers

Motorists driving illegally without insurance don’t pay a penny in premiums, so it’s left to other motorists to pick up the bill. The Motor Insurer’s Bureau estimates that there were more than a million uninsured drivers in the UK in 2017, despite the threat of prosecution and a hefty fine. All car owners must, by law, have insurance unless their vehicle is kept off road and declared to the DVLA via a SORN (via a Statutory Off Road Notification), yet this problem persists.

Gender

A European Court of Justice ruling means that insurers are no longer able to offer a discount to drivers on the basis of gender. Other factors, such as the power of the car and the mileage travelled, can help to make insurance cheaper, but gender itself cannot be used to determine the premium.

Age

Younger drivers are statistically more likely to make claims on car insurance, therefore their premiums are higher. The fact that they have not had a chance to build up any no claims discount also comes into play. Black box or telematics insurance can be a good option for young motorists, as it takes into account how careful a driver the person is. The technology can be installed in the car or via a smartphone app. The driver as well as the insurer can track their driving track record, and therefore see where they can make improvements if necessary.

Occupation

Statistically, some jobs are more risky than others, and insurance premiums reflect this. A night club worker may be, statistically speaking, a higher risk than a nurse, so they will fork out a higher sum for insurance to cover this increased risk.

Postcode

Some postcodes are claims hotspots, while others are considered low risk. If crime statistics indicate a higher risk of vandalism or theft, this can raise insurance premiums. Inner city areas in particular are often more pricey due to higher rates of crime.

Insurance group

All cars sold in the UK are placed into one of 50 insurance groups. This placing is determined by the projected cost of a claim, parts and repair prices, the value of the car, how powerful it is and its safety features. Modifications to the vehicle can also add to the insurance cost.

Other related FAQs

Looking for more related content to this? We’ve picked a selection of related topics that you may find helpful

Generally speaking, your car insurance covers your vehicle and damage that you may cause to other vehicles and motorists. Depending on the type of policy, it can also cover a range of additional extras, such as medical expenses and breakdown assistance

If you’ve had an accident of any kind, you’ll need to report it to your insurer soon afterwards. When you do, they’ll seek a detailed explanation of what’s happened and assess the damage done to your car. When they have a clear understanding of what’s occurred – and assuming you have fully comprehensive cover, they’ll arrange to repair your vehicle – or pay its market value if it’s written off.

If you make a claim on your car insurance, then yes, the cost of renewing your insurance will go up, unless some other significant factor works in your favour to bring it down.

Car insurance can go up for a number of reasons – especially if you’ve had an accident or received a fixed penalty in the last year. If you haven’t, you might find you’re just getting a poor deal when your deal automatically renews – so don’t be afraid to shop around until you’ve got a better price.

There are a number of reasons why car insurance quotes can change, such as if you’ve recently changed your address, or for reasons out of your control, like government tax increases.

In the UK, every car is allocated an insurance group. This helps insurance companies determine the cost of cover. The groups run from 1, which offers the cheapest premiums, to 50, which offers the highest. The cheapest car insurance group is therefore group 1.

Unfortunately, making any kind of insurance claim will often increase your renewal premium – even if the accident wasn’t your fault.

If you make a claim on your insurance policy, car insurance excess is the amount you will pay towards that claim. There are two types of car insurance excess – one compulsory, the other voluntary. The compulsory excess that your insurance company sets is the amount you must pay towards any repair done to your vehicle if you cause an accident. The voluntary excess is an optional amount on top of this – which means you’ll pay more towards repairs – but your annual premium price will come down in exchange.

A no claims bonus is a discount that’s applied after your insurance premium is calculated by a car insurance provider. The discount doesn’t stop your premium from going up; instead, it simply gives you a percentage off your premium – and that discount grows with every claim-free motoring year you have.

Car insurance is usually calculated based on the likelihood of you making a claim in the future. A range of factors are taken into consideration too, such as age, occupation, your driving history and the details of your vehicle.