The Surge in UK Car Insurance Costs: What’s Driving the Increase?

The cost of car insurance in the UK has seen a notable surge recently, catching many drivers off guard when it comes to their renewal. The rise has come at a time when many households are already grappling with other financial pressures, prompting a closer look at the factors behind this trend. Here is an explanation of what’s driving the increase in car insurance costs and what it means for UK drivers and more specifically, our classic car, multi-car and specialist vehicle clients.

The Factors Behind the Rising Costs

1. Inflation and Economic Pressures

Inflation has affected various industry sectors, including car insurance. Increased costs of living have in turn impacted costs associated with car repairs, full replacements and other services. Repairers face higher prices for parts, labour and energy costs, these costs are then passed onto insurance companies, who then adjust premiums accordingly to cover their expenses.

2. Increased Frequency and Severity of Claims

Both the frequency and severity of claims have risen. Factors contributing to this include more vehicles on the road post-pandemic, leading to a higher likelihood of accidents. Insurers are also facing increased claim costs as modern cars with advanced driver assistance systems and electric vehicles are more costly to repair. I know what you might be thinking…”but I have a classic car, why is my insurance more expensive”, however insurance companies don’t separate pots of money for different types of cars, so high claims costs for electric vehicles will mean there’s less money in the pot to pay for repairs on classic cars, so premiums increase for everyone.

3. Shortage of skilled mechanics and restorers

To be able to repair a classic car requires specialist skills, such as veneering, wire wheel building, chrome plating, lead loading and body building etc. Demands of those skilled tradespeople mean that their labour costs are significantly higher for their time and skills.

4. Increased theft in classic cars

Criminal activity in the form of car thefts and fraudulent claims is also driving car insurance costs up. The DVLA has released statistics for vehicle crime throughout 2023; 64,087 cars were reported being stolen to the DVLA in 2023- that’s roughly one every 8 minutes! Many of these are not recovered and many thefts result in large claim payouts.

Classic cars are also being targeted for theft. Stuart, a member of our team has a fellow classic car enthusiast friend, who frequently displays their car at shows. His car is what we would call a ‘trailer queen’ and he meticulously cleans his car as soon as he gets home from car shows. Luckily, this friend checked under the wheel arches when cleaning and alarmingly found a tracking tag that had been planted on his car by someone at the show. Needless to say, he drove far away and disposed of the tracking tag. We would hate to think of what would have happened if he hadn’t found the tracking device!

5. Parts shortages and delayed repairs

Manufacturers are still feeling the strain of supply and demand for parts and are playing catch up from the shortages that occurred during the pandemic. This is causing delays in repairs and resulting in more customers taking advantage of a courtesy car and therefore the length of hire is far longer than in previous years and this can be costly. Following a rather nasty non-fault accident, one of our own team members had a car hire and the costs to insurers were £232 per day.

The Impact on Drivers

For UK drivers the rise in car insurance premiums is a cause for concern. Many are already dealing with increased living expenses and higher insurance premiums add to the financial burden. This situation is particularly challenging for younger drivers, who typically face even higher insurance premiums due to their perceived higher risk.

How to Manage Rising Insurance Costs

Despite the upward trend in insurance costs, there are several strategies you can try to reduce your insurance premium for classic and multi-car policies:

1. Use an Insurance Broker: Insurance brokers have close relationships with panels of insurers and can secure attractive premiums you may not be able to find on comparison websites. They can also offer advice on how to reduce your costs and negotiate renewal premiums on your behalf.
2. Do your research before buying: Before purchasing a new car, do your homework to understand the potential insurance costs. Investigate the likely insurance premiums for different models to avoid any unpleasant surprises after your purchase. Certain vehicles, like mini SUVs, tend to have higher premiums due to their attractiveness to thieves. Some cars may come with higher excesses and stricter security requirements from insurers. A good starting point is to search for the "Top 20 stolen cars" to get an idea of which models might be more expensive to insure.
3. Take Advantage of Multi-Car Policy Savings: Multi-car policies offer discounts for more than one vehicle and the more vehicles you have, the more you will save. If you have a classic or specialist vehicle alongside your everyday car, you could make savings by putting these cars onto the same policy. It doesn’t matter if these cars have different renewal dates, we can arrange to add the other vehicle(s) when it is due for renewal.
4. Review your annual mileage: The more miles you do, the higher your insurance premium will be due to spending more time on the road and therefore, more likely to be involved in an accident. Over-estimating your annual mileage could be hiking up your insurance premium. Check how many miles you did in the past 12 months and review this when your policy comes up for renewal, you could save some money.

5. Check the market value of your modern cars: We recommend using online tools to check the true market value of your modern cars when providing insurers with an estimated value. Modern cars do depreciate over time and if your declared car value on your schedule is still the same as what you paid for it brand new 2 years ago, then you could be overpaying for your insurance premium.
6. Join a car club: Many insurers offer discounts for car club members which can help reduce insurance costs in the long run. Members of car clubs also benefit from other services such as valuations, events, track days, services and technical support. Check out some of the car clubs we support here.

Looking Ahead

The future of UK car insurance costs in the UK will depend on several factors, including economic conditions, crime and advancements in vehicle technology. Whilst the current trend shows rising costs, smart choices can help drivers mitigate the financial impact. Our intention of this blog post is not to paint a dark picture of the motor insurance industry, however, many people have asked us why rates are escalating, so we are taking the opportunity to give you some of the information we are privy to.

We do have some good news. Whilst we have not been able to completely avoid increased rates, on average our classic car rates have only gone up by 10% and our multi car by 15%. Comparing these increases to the reported average of over 50% with other providers proves that experience and good risk selection protect your insurer panel and therefore our clients.

To end on a positive note, this situation will not go on forever and soon we should hopefully see a turnaround in the market where insurers will start to reduce their premiums. When this happens, we will be delighted to pass these savings onto you.

You can speak to a member of our experienced team today and we would be happy to see if we can save you money on your renewal, please call us on 0121 550 2380, Mon-Fri 9am – 5pm.