The latest data from the Association of British Insurers (ABI) comes after Confused.com revealed prices dropped slightly in the first quarter of this year. The comparison site found premiums are now £54 cheaper on average than at the end of 2023.
Despite the apparent good news, prices are still much higher than 12 months ago. New Compare the Market data shows younger drivers are being hit hardest, with 17-year-olds being asked to fork out an average of over £3,000 a year for cover.
Here, Which? delves into the cost of car insurance and explains how to pay less.
What's happening to car insurance prices?
The ABI's latest figures show the average car insurance premium now sits at £635, up 1% from £627 in the final three months of 2023. The rise is significantly less than the 12% jump seen between the third and fourth quarter last year.
That said, the cost of cover is still far higher than 12 months ago. It is now 33% more expensive to buy a policy than at the beginning of 2023, when the average price of car insurance was £478.
The ABI releases the most comprehensive data on car insurance pricing, on a quarterly basis, as it's based on the price paid by drivers. It also reflects the premiums paid by all customers (both those renewing and those shopping around).
The chart shows how the average cost of a car insurance premium has risen since January 2022:
The ABI isn't the only industry group with an index showing how prices have changed. Comparison sites publish data as well, but their figures only reflect quotes given to customers searching for car insurance.
The latest report from Confused.com showed motorists paid 43% more for car insurance in the first three months of 2024 compared to last year. The average cost of taking out a new policy in the UK is now £941 – an increase of £284 in the past 12 months.
Meanwhile, figures from insurance price experts Consumer Intelligence – also based on quotes – revealed the average quoted price of car insurance jumped by 56.4% in the year to February 2024.
Both indices found signs of a slowdown, however. Data from Confused.com showed that premiums in the first quarter of this year were £54 cheaper on average than at the end of 2023.
The annual rise recorded by Consumer Intelligence is lower than the 67.2% increase seen in the year to the end of November.
How much are young drivers paying for insurance?
Young people are being particularly squeezed by premium hikes, with the latest data from Compare the Market showing motorists that want to get behind the wheel at 17 - the minimum legal driving age - pay the most.
These newly qualified drivers face paying an eye-watering £3,075 on average for their insurance. That's a rise of 53% on last year, when the average price paid was £2,004.
The comparison site's research, based on quotes between March 2023 and March 2024, found premiums dropped significantly for drivers who just passed their test in their 20s. For example, a 22-year-old who has just passed their test will pay an average of £2,503. That drops to £1,986 for a 27-year-old - 35% less than someone 10 years younger.
Some drivers paying far above the average
Customers who choose to pay monthly are likely to be paying even higher prices, thanks to sky-high interest rates.
Drivers who choose to spread payments tend to be younger and/or less wealthy, leading the Financial Conduct Authority's head of insurance to describe insurers' interest rates as 'a tax on being poor'.
Which? is pushing for insurers' interest rates to be compared in a league table and for the regulator to take action against those not providing fair value.
Find out more:Why is the cost of car insurance so high?
The rate of CPI inflation might have dropped dramatically from its peak of 11.1% in October 2022 to 2.3% in April 2024, but soaring repair costs have been largely blamed for premium price rises.
ABI figures show that the cost of repairs jumped 32% in the third quarter of 2023. Other cost pressures reported by insurers during the same period include longer repair times – this drove up the cost of providing replacement vehicles by 47%.
The cost to replace written-off vehicles has also increased, as the average price of new cars has risen 43% over five years.
The ABI points to technological advancements in new vehicles for why the cost of repairs and replacements are on the up. Electric vehicles, in particular, require more specialist expertise to repair and take longer to fix.
All of these pressures mean insurers are spending more on claims and costs than they are collecting in premiums.
Find out more:What impacts premium prices?
Location, age, and experience all have an impact on premium prices.
r, according to Confused.The younger you are, the higher the cost of insuring a vehicle. That's because drivers who haven't been on the road for long are considered more likely to be involved in a car accident, so providers up their premiums to account for that increased risk.
For example, government figures show that, in 2022, around a fifth of all those killed or seriously injured from collisions in cars involved a young driver. Young male car drivers aged 17-24 are four times as likely to be killed or seriously injured compared with all car drivers aged 25 or over.
The cost of car insurance also drops over time as the driver gains more experience on the road. Compare the Market's latest research found new motorists paid £771 less after a year of driving.
How much could you save by switching?
Confused says loyal customers are facing some of the biggest price increases to their premiums. According to its survey of 2,000 drivers, of those who received their renewal between January and March this year, 75% received a higher renewal price of £94 on average.
But you can potentially make big savings by shopping around for a better deal. The comparison site found almost half (45%) of customers that received a higher quote saved an average of £90 compared to last year, simply by switching provider.
Other ways to keep costs down
Here are a few other simple ways you can reduce the cost of car insurance:
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