Why Does My Car Insurance Keep Increasing?

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All car and motor insurance premiums in the UK have slowly increased over the past few years. At Higos, we understand that this situation frustrates young motorists and experienced ones alike, with many left wondering why their car insurance costs continue to climb.

There are a large number of reasons that contribute to rising car insurance premiums, such as societal changes, technological advancements, regulatory requirements, and economic conditions.

To help you understand why your car insurance keeps going up, we have put together an article detailing the driving factors behind steady rise of premium prices.

Find out why your home insurance premium is increasing in another of our latest blogs.

  1. Inflation

Inflation directly affects rising premiums for motor insurance, as the costs associated with vehicle repairs and the labour required to repair vehicles rise with inflation. This means insurance companies spend more to repair vehicles, resulting in higher premiums for all motor policies.

  1. Fraudulent Claims

A big factor contributing to the increase in car insurance premiums is the prevalence of fraudulent claims. Insurance fraud takes various forms, including staged accidents, exaggerated injuries, and falsified information. These fraudulent activities not only inflate claim costs but also necessitate increased vigilance and investigation by car insurance companies, ultimately leading to higher premiums for all policyholders.

  1. Cost of Vehicle Repairs

The advancement of vehicle technology has led to more sophisticated cars with intricate components. While these advancements enhance safety and performance, they also result in higher repair costs. Modern vehicles often incorporate expensive sensors, cameras, and specialised materials, making repairs following an accident significantly more costly. Auto insurance companies may apply higher premiums to account for these complex additional enhanced features  to vehicles.

  1. Whiplash Claims Reform

In an effort to tackle the issue of exaggerated and fraudulent whiplash claims, the UK government introduced reforms aimed at reducing compensation payouts for minor injuries sustained in road traffic accidents. While these reforms are intended to lower motor insurance costs in the long run, they initially resulted in a surge of claims as individuals rushed to secure compensation before the changes took effect. This influx of claims has placed additional financial pressure on insurance providers, contributing to the overall rise in premiums.

  1. Insurance Premium Tax

Insurance Premium Tax, which can be applied to a many insurance premiums (including car insurance), has steadily increased over the years. Since its introduction in 1994, IPT has risen multiple times, with the standard rate currently set at 12%. This tax hike directly impacts the cost of insurance for consumers, as insurers pass on the additional expense to policyholders in the form of higher premiums.

  1. Personal Injury Awards

The compensation awarded for personal injuries sustained in road traffic accidents has also seen an upward trend. Courts increasingly award higher payouts for injuries, including both physical and psychological harm, reflecting a growing societal awareness of the long-term impact of accidents. While these awards provide necessary support for victims, they also contribute to the overall cost of car insurance claims, driving up premiums for all drivers.

Summary

The factors driving why your car insurance keeps going up are varied, encompassing issues such as fraudulent claims, rising repair costs, regulatory reforms, tax policies, and evolving compensation standards. While some of these factors are beyond the control of individual drivers, understanding the underlying causes can help consumers make informed decisions when selecting motor insurance coverage. Additionally, policymakers, insurers, and regulatory bodies must continue to collaborate on initiatives aimed at addressing fraud, promoting road safety, and mitigating the financial burden on motorists.

Higos, a Chartered Car Insurance Broker

At Higos, we have a wide range of knowledgeable and friendly advisors who are dedicated to helping you find a car insurance policy that works for your specific needs. We also have an in-house UK based claims team ready to provide you with assistance when you need it most. If you want to find out more, simply visit our motor insurance web page. For quote today, just call 01458 270324 or 'Request a call back'.