Skip to main content

In the last couple of years, with premium prices rising dramatically, many UK drivers have been dreading the prospect of renewing their car insurance policy. So why has car insurance become so expensive? The UK car insurance scene is quite turbulent at the moment, with everything from skyrocketing premiums to new tech, car sharing and temporary car insurance all playing a part in the story. It’s a lot to unpack. So, let’s get into it and try to get a clearer picture of the situation. 

First off, the current state of the UK car insurance industry is, to put it mildly, in flux. Premiums have been on the rise, and it’s not just a slight uptick. We’re talking significant jumps that have drivers across the country doing a double-take when renewal notices hit their inboxes. 

Data published this January reveals the average cost for motor insurance throughout 2023 was 25% higher than in 2022. This information is sourced from the ABI’s Motor Insurance Premium Tracker. According to the tracker’s findings from 1st October to 31st December 2023:

  • The average premium for private motor insurance reached £627, marking a 12% increase from £562 in the preceding three months.
  • This average premium is 34% higher than in the last four months of 2022, which was £470.
  • On an annual basis, motor insurance premiums in 2023 were 25% higher than in 2022, with prices at £543 compared to £434 in 2022.

What caused the increase in prices?

This staggering surge in costs can be chalked up to a few key factors. One of the biggies is the increase in repair costs. Thanks to modern cars being equipped with all sorts of high-tech gadgets and gizmos, fixing them post-prang has never been pricier. Advanced driver-assistance systems (ADAS), while fantastic for safety, can cost an arm and a leg to repair. Plus, the global supply chain issues haven’t been helping, with delays in parts leading to higher costs all around.

Then there’s the issue of insurance fraud, which, let’s be real, is a persistent thorn in the industry’s side. It’s estimated to add a hefty chunk to every law-abiding driver’s premium. Insurers are constantly battling fraudulent claims, but it’s a tough war to win.

“For 17-year-olds, average prices are now £2,877, after a 98% (£1,423) increase. But it’s 18-year-old drivers who are taking the biggest financial hit,” she says. “Premiums are now 84% (£1,447) more expensive, with average costs now £3,162.”

The Guardian, January 2024


But it’s not all doom and gloom. There are some potential solutions on the horizon that could help ease the burden for consumers. Technology, for instance, is playing a big role in reshaping the landscape. Telematics, or black box insurance, offers a way for drivers to prove they’re safe behind the wheel, potentially lowering their premiums. These hardwired boxes or smartphone apps, record driving style and report back to the insurance company. It’s like saying, ‘Hey, I’m not going to do anything daft and I’m willing to prove it, so how about a break on the price?’

Another avenue being explored is the use of AI and machine learning to streamline claims processing, detect fraud more effectively, and ultimately reduce costs for insurers that can then be passed on to consumers. It’s early days, but the potential is there.

The industry is also seeing a shift towards more personalised insurance models. Instead of a one-size-fits-all approach, insurers are getting nifty with data to tailor policies more closely to individual risk factors. This could mean fairer pricing for those who pose less risk.

Driving habits and behaviour

Looking at the challenge from a slightly different angle, Temporary car insurance (also known as short term car insurance) and car sharing could also be game-changers for UK drivers. Let’s break down how these options could ease the pressure.

Temporary Car Insurance: This is a really viable option for those who don’t need a car all the time but still want the flexibility of driving when it suits them. Imagine you’re borrowing a buddy’s car for a weekend jaunt or you’re between cars and need to drive now and then. Instead of forking out for a full year’s premium, you can get insured for just the time you need, whether it’s just for one hour or up to several weeks. Here’s how it helps:

  • Cost-Effective: It’s generally cheaper for occasional drivers to go for temporary insurance than to be added to an existing policy or to commit to an annual one. You’re only paying for what you use, which can significantly reduce costs.
  • Flexibility: It gives you the freedom to drive when you need to without the long-term financial commitment. Perfect for young drivers, students, or anyone who doesn’t drive regularly but wants to keep their options open.
  • Simplicity: Getting covered is usually quick and straightforward, often with immediate coverage. No need to navigate the complexities of traditional insurance policies for short-term needs.

It’s simple. Get a quote here via this website, or download the Zixty app (Apple AppStore and Google Play), enter a few details, and voila, after we’ve done a few checks you should be ready to go. 

Benefits of using temporary car insurance

Car Sharing: This is another innovative approach that’s gaining traction. Car sharing encourages people to loan their vehicles when they’re not using them, meaning occasional drivers can access a car only when they need one. This model has several key benefits:

  • Reduced Ownership Costs: For car owners, sharing their vehicle can help offset the costs of ownership, including insurance. It’s a way to make the car work for you when you’re not using it.
  • Lower Insurance Costs for Borrowers: Those who borrow cars through sharing platforms typically have insurance included in the rental price, managed by the platform. This can be more affordable than other short-term options and certainly cheaper than owning and insuring a car full-time. For those people just borrowing a car or van, they can just get the temp cover we mentioned above. 
  • Environmental and Social Benefits: By maximising the use of existing vehicles, car sharing can reduce the number of cars on the road, leading to less congestion and lower emissions and easier parking. It promotes a more communal, resource-efficient approach to driving.
“The sustainability effects of car sharing is often referred to as the number of private cars that can be removed from the streets by sharing instead of owning. Our results show that up to 8 privately owned cars are removed from the streets for each Volvo Car Mobility car”

Capgemini Report, 2020

Both temporary car insurance and car sharing represent a move towards more personalised, flexible, and cost-effective ways to manage driving and insurance. They offer a practical solution for many, particularly younger drivers facing steep premiums, those living in urban areas where car use might be infrequent, and environmentally conscious individuals looking to reduce their carbon footprint.

In essence, these options can alleviate the financial pressures on UK drivers by providing alternatives to the traditional car ownership and insurance models. They also reflect a broader shift towards an economy that values flexibility, sustainability, and shared resources, which could ultimately lead to a more accessible and less costly driving experience. It’s about fitting the car and insurance to the lifestyle, not the other way around.

So what are we to conclude?

The UK car insurance industry is at a crossroads. With premiums soaring and consumers feeling the squeeze, there’s a clear need for innovative solutions. Whether it’s through technology, regulatory changes, driver behaviour or new approaches to pricing, there’s hope on the horizon for a more equitable system. The road ahead might be a bit bumpy, but with a bit of ingenuity and a lot of cooperation, the industry can navigate towards a future where car insurance is fair, affordable, and reflective of the modern driving experience. Here’s to hoping for smoother journeys ahead!