Why has my car insurance doubled?

To get a better understanding of what’s behind this increase, let’s go through each of the major contributing factors:

Higher repair costs for high-tech vehicles

From parking sensors to AI driver assist and collision detection systems, modern vehicles are jam-packed with advanced technology. These features are great for safety, comfort, and ease – but they also make modern cars harder to maintain and to fix when they break down.

Rather than simple repairs that anyone with basic mechanical skills can handle, modern cars require sophisticated electrical and computer engineering experience, along with costly components such as chips and motherboards.

For example, repairing a bumper on an older car is a simple job. In a worst-case scenario, the bumper will have to be taken off and replaced with a new one. However, a newer car with sensors and cameras in its bumpers is a lot more complicated. The same bumper repair that was so fast and inexpensive for the older car could run into thousands of pounds for the newer car.

This rise in repair costs means that insurers may have to pay out more when cars are damaged, which in turn means higher car insurance prices.

Inflation and supply chain disruptions

Since 2021, the cost of living in the UK has risen sharply. Almost every industry has been affected by higher prices and squeezed margins. Car-related industries like auto mechanics, petrol stations, and vehicle manufacturers have all felt the pressure of rising costs, and have had to raise their own prices in response.

As materials like steel, aluminium, and microchips become ever more expensive, repair costs rise as well. And the more a vehicle costs to repair, the more it costs to insure. 

At the same time, supply chain disruptions as well as worldwide conflict and tariff issues have caused longer wait times for parts. This means that insurers have to supply courtesy cars more frequently and for longer periods. This increases insurer costs, which are ultimately passed on to customers in the form of higher car insurance premiums.

Increased claim frequency

According to the ABI, car insurers dealt with 2.4 million insurance claims in 2024, with the average claim hitting an all-time high of £5.3k.

As the amount being paid out for claims increases, the overall risk profile for insurance providers gets worse. Unfortunately, this means a hike in car insurance premiums across the board.

Rising numbers of uninsured drivers

It’s illegal to drive without car insurance in the UK, but an increasing number of drivers don’t seem to have got this message. 

Illegal, uninsured driving has a big impact on all drivers. When an uninsured driver causes an accident, insurers have to cover the costs and compensate the victims through the Motor Insurers’ Bureau (MIB). These costs ultimately get passed onto insured drivers via higher car insurance prices.

The ‘Loyalty Penalty Ban’

In 2022, the FCA (Financial Conduct Authority) banned ‘loyalty penalties’ in which customers renewing their car insurance were charged more than new customers.

On paper, this move should protect long-term policyholders from unfair price hikes and result in generally cheaper car insurance costs. In practice, however, the market adjusted to compensate for insurers no longer attracting new customers with cut-price deals. Pricing levelled out, and many saw their car insurance prices rise to match the real cost of coverage.

‘Crash for cash’ scams

‘Crash for cash’ scams involve fraudsters deliberately staging accidents in order to claim insurance payouts. Fake injury claims, exaggerated damages, and so on all contribute to insurer losses. 

This kind of fraud has seen a huge rise across the UK in recent years. In order to combat this, insurers are investing heavily in fraud prevention measures. Unfortunately, rising costs for insurers almost always translate into rising insurance costs for consumers, and this is no exception.

As we’ve seen, car insurance costs have increased a lot in recent years, but it may not actually be as bad as the numbers make it seem.

It’s important to remember that this 2021 rise launched from an extremely low baseline. Car insurance prices plummeted in 2020 as lockdowns kept drivers off the roads. In mid-2020, car insurance prices fell to their lowest since 2015 as car use (and therefore car accidents) declined. 

So, what looks like an enormous and rapid rise in prices as people took to the roads after Lockdown isn’t actually as dramatic as it seems. Much of it can be accounted for by a return to ‘normal’ after lockdowns. 

That’s not to say that car insurance prices aren’t unusually high. They are. But, the statistics can be misleading without context.