Why is car insurance so expensive?


Affordable car insurance is almost impossible to find for most drivers and renewal premiums seem to rise and rise.

The Insurance Blogger asks why the cost is so high when motor insurance companies are losing money.

According to the latest figures from the Financial Services Authority, motor insurers are paying out £1.20 in claim settlements for every £1 they collect from drivers.

The cash to cover the claims gap previously came from returns on investments, but with interest rates so low, the firms are looking to rake in the shortfall from customers by raising prices.

Some of the factors that put the price of car insurance up are beyond the control of motorists – but they can cut some costs if they want:

Lawyers cash in on easy money

The Association of British Insurers (ABI) looked at 50,000 low value road accident claims from September 2009 to March 2010, and found that for every pound paid in compensation, 87p was paid in legal costs.

Drivers are paying £2.7 million a day to lawyers through their motor insurance premiums – or £41 per motor insurance policy per year.

Crooked drivers cheat the rest

The ABI uncovers 108 fraudulent car insurance claims every day.  The AA estimates fraud is a problem that adds £80 to the cost of every policy.

Third party cover is not cheap car insurance

This is often a false economy. Drivers with third party fire and theft cover statistically have more accidents than other drivers, increasing the risk for insurers and pushing up costs. Some third party policies cost more than comprehensive cover for the same driver and the same car.

Spreading the cost is not a cheap option

Most car insurers will cut the cost of your policy if you pay up front rather than in instalments. Finding cheap car cover and then paying by direct debit is often adding rather than saving money.

Protecting a no claims bonus

This is a damned if you do, damned if you don’t option. A no claims bonus can bring down the cost of car insurance, but protecting a no claims bonus does not mean a premium will not increase as the result of a claim.

Taking cover that’s not needed

Many motorists do not read their policy documents and renew cover without realising they are paying for options they do not use or need. Free roadside repair cover on a new car already covered for breakdown by the maker is an example.

These figures show that the best way of finding cheap car insurance is to check out policy terms and conditions and then shop around for the best deal that offers the cover you really need.

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29 Responses to Why is car insurance so expensive?

  1. George says:

    Hello, i am 17 male, and i passed my driving test yesterday. i have a peugot 106 1.4 quicksilver and i cant insure it due to the prices being stupidly high. I am getting quotes over £7000 mark. Before the new year i was getting quotes around 1800 whch it acceptable for my age, I just want to know why are these prices have gone stupidly high?, and is there any where i can find a cheap insurance quote? any thing under 2800-2900 will be acceptable. PLEASE HELP!!!

  2. kim says:

    hi

    try putting your parents down as additional drivers this might help.

    good luck

  3. Anthony says:

    i’m 30 and still paying over £1,500, i have 6 years no claims and only 3 points for speeding 4 years ago. it is unfair that hard working decent people have to pay so much money to bureaucrat lawyers and fraudulent claiments. I’m glad i’m not in the your position above me. I think the best thing for young drivers is to just go as named drivers with companies like Direct Line who allow their named drivers to build up no claims. You are still gonna pay an arm and a leg but its a should still be a lot cheaper than £7000, i hope. Good luck pal

  4. Joanne says:

    Hi, car insurance is ridiculously high – i had an insurance policy last year which cost £450 – renewal this year with the same company was £860 even tho I had not claimed and have over 15 years no claims bonus. When I spoke to the company they said that they premiums are going up because of fraudulent claims that are costing insurance companies a fortune. I eventually had to pay £800 so I know how you feel. It does seem that the more honest you are the more you are penalised. I would recommend you try either Churchill, Direct Line or Budget (which is who I have this year) but make sure you read the policy before buying to make sure you are not paying for extras like roadside recovery etc as these are usually more expensive than with the AA, RAC or Green Flag. Its a lot of messing about and very time consuming but good luck :-)

  5. sannjay says:

    Insurance companies have the upper hand since the law is on their side to enforce insurance on every road using vehicle. Insurance was once based on individual and vehicle criteria but, now it’s simply a massive increase on premiums each year and there is no real justification. Yes I agree, there are alot of people who don’t have insurance / make fraudulent claims but, thats down to the insurance complanies and Police to investigate and not pass on the expense or loss to other law abiding drivers who pay and have insurance. It’s become a commercialised witch hunt by insurance companies and what will happen is that many motorists will stop buying insurance and take the risk of driving cars without or find other means of beating the corrupt system. Older cars are penalised so much that the vehicle value falls into negative compared to the premium on the insurance. Somebody in government must do something!

  6. Sean says:

    Hi all, just looking at this posting, and I agree that motor insurance is now ridiculously high, in fact it is pricing drivers off the road, I am self employed with a van, and I recently came into my possesion of a Kia Rio 1.3 on a 51 plate, the car was taken off the road by its previous owner as he lost his licence due to a drink drive ban, he lost his licence, and so paid me for my services I had provided to him with giving me the car, my Van insurance last premium was £860.00 in Feb this year (2011) and I was quoted £3,699 for the car if I wanted to drive it, the car is only worth £1000 max! When I asked my insurers why this was the case, I was told I did not have any no claims bonus due to a claim against me this year in march due to a driver of an 1999 tatty saloon car hitting my van door that flew open wide during high winds, the car they were driving was worth about £500, the damage was supeficial eg cracked wing mirror and a scratch on there front offside wheel arch, I have later found from my insures they claimed £2,400 in damages to the car and of course it would have been whiplash etc etc etc, even though they were fine at the time of the accident.Taking all this into consideration, and calculating that my no claims bonus of 10 years accident free driving with no endorsements on my licence ever in 15 years of driving, I am now considered to expect to shell out £3,699 for a 1.3 car, given 100% no claims discount this would still mean I would have to pay a premium of £1,849. In my opinion the insurers are having a free for all because the law is on there side, and are clawing back from insured drivers with excellent driving records, any amount they have had to pay out due to compensation claims made by drivers from no win no fee companies. I for one will make damm sure if someone as much taps my bumper with there car on my van, I will go for the claims culture also, as that is the way they (the insurance companies) have made it, by not following full and thorough investigations into claims made from gold digging drivers of old clapped out motors. As its win win win all the way for them, or could it be that the previous owner of the car who has a drink driving ban against him has left a legacy on its registration mark??? god only knows, but the car is getting sold, and the insures are getting nothing from me….anyone else been caught up in this situation, if so I would love to hear there stories, and I believe insurance companies need to get there act together, or if they are losing money, then just stop selling insurance then, its as simple as that.

  7. John Bakewell says:

    Have a go at the Institute of Advanced Motorises test. Passing the test should mean lower premiums for your car or motorbike insurance.

  8. Paul says:

    Totaly agree with all the posts on this site. The insurance companies and police have to sort the fraudulent claim culture out, and stop these no win no fee parasites from popping up everywhere you look
    Agree with the post above about it must be worth taking the risk of not getting insured, when you look at the fines in the local papers they recieve. I’m not saying this is the right and proper thing to do, but while i’m on my soapbox having a rant. this also applies to the energy companies that think they can just think of a number and add a nought and there it is your new bill.

  9. Frankie says:

    Everyone is having to take reductions in salaries, but insurance is increasing by a drastic amount. My renewal alone was 35% more this year.

    What can we do to protest against the crazy cost of insuring a car?

  10. gosef says:

    iam 52 years old ,,i had my EU driving licence 25 years and i did changed to uk full in 2008 and cant find cheap insurance foe 1 very small car 1.3 cc , the cheapest i found it was 1200 hahah really crasy ,
    this car worth only 300 pound ,,, i search all net for over 3 days and cant find any
    i have no claim bonus ,,,,,any helppppppppp pllllllssssss ,,dont know where can find cheap ,,,dont know what i do

  11. lee says:

    hi ,

    i recently passed my test and i am 27 early this year i was getting quotes of around £1850-2600 on 1999-2000 1.4 vw golfs but now when i try to get insurance i am getting £5210 + … i feel this is ridiculous as the car was only bought for £750 and to make it worse if you try to do monthly payments the price goes up again… i mean who is gonna pay a deposit of £1400 then an additional £400 a month thats absolutely ludacris…..

    i don’t expect anyone to help just felt like ranting..

  12. Peter says:

    I agree with a lot of comments on this site. I think the way the system calculates premiums is all wrong for example if you buy winter tyres you should have that taken into acount or if you have advanced driver tests it should be also taken into account. whats with no years claims discounts each year i get 1 added. but my premium keeps going up – is it worth it i think this proves the system is broke and its time a new system was invented.

  13. Kiran says:

    I paid £400 last year 10 yrs no claims discount this year got a quote for £1040 being the cheapest car value £900 and being asked to pay for others mistakes someone ought to start a petition for the government to take action.

  14. phillip Vinall says:

    Hey all. I know its no consolation but I’m in the same boat. I had 6 years driving a 1.8 and when I sold it got me a motor bike, little did I know the 6 years no claims I built up were lost. I rode my bike for a year and then brought another car. Due to financial problems I sorn the car but kept it insured for a year before scrapping it. I have been without a car for 6 months now and trying to get another car. I work 60 plus hours a week and it takes me over an hour to get home on the bus so figured a car would be better. until I started looking for quotes. I’M 30 years old and the cheapest is I can get for a 1.8 mondeo 51 registration is 1700 with a 300 deposit. Where is that right? I say if the insurance companies lower their prices there will be less uninsured people on the roads, which means less money wasted taking people to court and most of them being repeat offenders are sent to prison at tax payers cost. Make insurance affordable AND you save our economy

  15. phillip Vinall says:

    If someone can get a petition going ill definatly sign it

  16. lee T says:

    Hi, i’m 27, been driving 5 year and got 6 year NCD.
    i got a 15 year old Land Rover Discovery worth about 900-1000 top of the ticket.
    4 of jan 2011 i paid 360 pounds fully comp, my renewal come through for over 1460 pounds, every where i look, i cant seem to get anything lower than a 1000 pounds, i do less than 5k a year and dont want no fancy extras like legal cover, windscreen cover.. i don’t see value for money what so ever and i’m getting priced off the road… how can i overcome these “dick turpin” prices?

  17. graham says:

    Insurance companies have gone crazy ….. I am 28 and was looking at buying my first car (a Fiat seicento 900cc Mia) this is an insurance group 1 E vehicle and would cost around £950 for a nice example. O.k I thought for a fist car, Then I got the insurance quotes in … I have spent hours on the phone and have visited most of the big comparison sites and the cheapest price for me is £1880 (more if I pay monthly) and an excess of £800 ! This is just not a realistic price and when you factor in the cost of road tax, M.O.T, and the obligatory go go juice this £950 car would cost in excess of £5000 for the first year. God help me if I had an accident in that year too lol!
    So my ultimate decision has been this …. screw the insurance companies taking mega cash from me for my first car and go buy myself a £1000 brand new Chinese 125cc motorcycle, Pay £157 for the first years insurance (third party fire and theft) and only have a £175 excess to pay if there is any kind of accident .. It seems the more we all complain the higher the prices get!!!

  18. derek says:

    im 27 years old , passed my driving test last week and was qoauted £7.500 a year for a 1.2 fiat punto , i only paid £350 for the car , i wish i hadnt have bothered wasting all that time and money on passing my test now , the insurance componie might aswell have just told me your not allowed to drive , even tho ive passed my test .. i cant afford to pay them prices for insurance as i only earn about £9000 a year , what they expect me to live on.. i only wanted alittle freedom , but i cant even have that now ,

  19. Richy says:

    Please sign this e-petition and get the govenment to sort this out maybe they can do some good for a change!

    https://submissions.epetitions.direct.gov.uk/petitions/354

  20. Neil says:

    ARRGGHH!! I have been looking at buying a 2nd car which is a Landrover Discover P reg and was checking out all the comparrisson sites and was gob smacked at what I discovered. Not only were the prices rediculous i.e. in excess of £700 but to top off, I discovered that insurance companies are not just daylight robbers but also sexist! I am a 37 year old male, married, 2 young children and have been driving for 19 years and my liscence is clean. I have all my liscences bar a tanker and have years worth of NCD. As a result of the inflated prices my 33 year old wife put in her details as main driver and me as a named driver for the exact same car etc and she has been driving only 9 years with 3 years no claims and the quote came back as £265 fully comp and all singing and dancing!!! WTF!! Can somebody explain this to me and guranteeded I will be signing the above petition!!

  21. Angel says:

    I think, insurance companies want to keep high profits as they have been used to in the past, so now they are charging us huge amounts for car insurance to compensate for increase of insurance claims due to the credit crunch. We shouldn’t be paying for that and it is a shame that the Government is not doing anything to keep an eye on what these companies are charging us.

  22. fred says:

    I AM A SENIOR DRIVER ,HAVE BEEN RETIRED 5 YEAR BEEN A HGV DRIVER NEARLY ALL MY WORKING LIFE BUT CANT GET A REASONABLE INSURANCE QUOTE BECAUSE I LIVE IN THE WRONG POSTCODE.MY SON LIVES LESS THAN A MILE FROM ME BUT HIS QUOTES ARE LESS THAN A THIRD OF MINE.SURELY THIS IS DISCRIMINATION

  23. Charlie says:

    Car insurance is a joke. I am 23 this year, Been driving 5 years, 5 years no claims, clean license, cheapest quote is £800! Car is worth half of that, Barely do many more than 4500 miles a year, parked on a driveway.

    Not only that if I moved in with my girlfriend my insurance goes up £30 a month just because of a change of postcode.

    I have tax mot service and insurance all within the next month, I am tempted to not bother with any of it.

    The only way us drivers can stop this, Is give up your cars, we just have to sacrifice the conveineince(sp?)

  24. david says:

    I agree I am very nearly 24, have been driving since I was 18, I have had no accidents and no claims. Yet I struggle to afford car insurance. I am paying nearly 2k for a Ford focus, on a v reg. So the thing is only worth about 500. I also work 60hrs a week and struggle to pay the monthly premiums, I know I should get the annual cover but I don’t have two grand lying around. It’s beyond a joke now. Fed up and depressing.

  25. Andy says:

    Car insurance is an absolute joke. Why do insurance companies rip everyone off so badly its a disgrace that they are getting away with it. Ive been driving for 11 years have 6 years no claims and have no points on my license and I cant get cheap insurance for myself. My car is parked in a driveway every night Every year since 2006 my insurance has jumped up a minimum of £200 why is this happening its an absolute disgrace!

  26. stewart herd says:

    I am 50 years old, have had a full uk licence for almost 11 years, driven company vans for most of that and have been a named driver on my late mothers van and car policies for just as long with only two years no claims bonus of my own and two SP30 convictions from early 2009 , I own and drive a T reg Citreon Saxo 1124 but cannot get a quote for less that £500, why is this?

  27. Jackson says:

    It’s not just cars, motorcycles have been hit hard with an insurance spike – i spent alot of time and effort getting my motorcycle license a few months ago and when i went to the showrooms to see how much insurance cost per month will be for a 125cc i was shocked to discover that it was around £170 per month.

    I’m 30 and this is my first bike, really – the insurance is just as much as the finance on the bike, but hey i have to start somewhere.

  28. Chris says:

    **RANT ALERT**

    Insurance is a complete farce regardless what you do now,
    Im 27, have been driving 10 years on public roads, have got advanced driving experience due to previous jobs and sports on tracks and off road.
    I have completed and passed not only advanced driving tests but also sat police standard and police advanced driving tests, i also hold a european MSA race licence for track, car rallying and do alot of 4×4 off road driving as part of my job.

    I currently have 7years NCB (my first 3years i paid a portion on trade insurance)

    Ever since 17 i had always had sporty cars for my age (Astra coupe turbo’s, MR2 Turbo imports, Evo’s, Subaru’s and currently own a Skyline) but had never paid over the £1000 mark,

    When i had the MR2 Turbo i paid £350 full comp, this also included all modifications declared
    for the BMW M3 i had i paid £450 with all mods declared full comp

    The last quote i got for my Skyline R33 GTST was £700 (in january 2012)

    I have ran quotes through every so often just so i can brace myself on what i will be paying next year, so far quotes for my skyline are coming back at £6500, i thought about downgrading to another MR2 so ran quotes through for both UK spec and Jap import non turbo’s as well as the Turbo variants, this now comes in at £3000 (£2650 more than few year ago)

    This is even been confirmed by phoning the insurers and giving all driving experiance,licence history etc which used to give massive discounts.

    It now looks like regardless of what driving experience you have, how many NCB’s you have or what car you have, the UK has allowed insurers to push all privately owned vehicles into a position of where they cant be insured and legally not in a position to be driven….

    give it a short while and no doubt the only vehicles you will see on the road is public owned transport (which gets partial funding from government to cover insurance and repairs) but a handful of uninsured, untaxed and non-MOT’d vehicles……

    Like Germany,USA & Australia when you pass your test you should be issued a reg plate which is yours for life,
    you buy a new car, that reg gets placed to that vehicle, you sell that,buy another your reg goes onto that….
    Insurance is based on individual driver history and experiance, your licence is attached to that plate as such,easier to trace accidents etc so everyone else does not get penalised……

    The UK insurers and government are corrupt, the only ones who will survive this financial crisis war are the government, banks and the rich….

    **Rant over**

  29. Sam Haj says:

    I agree with other people here. The whole insurance system in this country is a total mess. Fraudent people get way with claiming thousands of money and people like us who play by the rules have to foot the bill. Lets not forge the insurance companies themselves make huge money in the process. I had an accident on my moped couple of years ago and the third party made fraduent claims of injury and was paid in excess of 6k although in court my lawyer pointed out that the claimant had also claimed injuries in a previous accident. Moreover she had also benifit cheated in excess of 200k for which she had spend time in prison. The judge ofcourse did not take that into consideration but felt that because she went to GP after the accident so she had ticked the boxes and was entitled to the compensation. I have sold my car and that moped. I can’t really afford to pay insurance costs in excess of £1k even though I am over 27.

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