Why has the price of insurance gone up?

Written by Steve Cook

Published on

From food shopping and fuel to electricity bills and phone contracts, it seems like everything has become more expensive lately. And that includes insurance.

In fact, the average cost of motor insurance was 25% higher in 2023 than the previous year (source: Association of British Insurers, 2024).

Inflation and today’s higher cost of living are partly to blame, but there are other things that can cause the price of your policy to go up.

Why has the price of insurance gone up?

Here’s a quick summary:

  • Rising inflation has increased the cost of most goods and services, including the materials used to manufacture and repair cars.
  • The motor industry is still suffering from shortages caused by the pandemic, which is driving prices even higher.
  • Expensive technology in modern cars has made it more costly to repair and replace vehicles following an accident.
  • If there have been changes since your last quote — say you’ve moved house or bought a new car — your renewal cost is likely to change, too.

Keep reading to learn more.

Vehicle shortages

During the pandemic, businesses and the transport industry were hit hard. This included the factories that make semiconductor chips, and the supply chains that move them.

These chips are used to make lots of different products, including cars. And they’re expensive — the chips and the technology that surrounds them can make up roughly a third of the cost of an average car.

The semiconductor shortage has led to delays in the delivery of new private and commercial vehicles, with a backlog of orders reaching back to 2022.

This shortage of new vehicles has driven up the market value of second hand cars, including hire cars and replacement vehicles used by insurers.

If you’re involved in a collision and your car needs to be repaired or replaced, your insurer will cover the cost. As these costs have increased, so will the cost of your insurance policy.

The rising cost of technology

The tech inside our cars has advanced at a fast rate. From light-detecting headlamps to keyless ignition, all of these modern additions make our cars better, smarter and more efficient. But they also come at a cost.

As the value of cars and their parts has increased, so has the cost of repairing or replacing them. And this cost gets passed along to your insurer following an insurance claim.

The growth of keyless entry cars has also seen a rise in the number of thefts, which only adds to the insurance risks and associated costs.

So, while new technology is great on the road, it is affecting the price of your insurance.

Your risk factors as a driver

Beyond the global economy and changes in the industry, there are reasons closer to home that might cause the price of your insurance to go up.

The first thing to know is that motor insurance is based on risk. If an insurer thinks the risk of your car getting damaged or stolen is high, you’ll probably pay more than someone they consider to be low risk.

It’s good to know which risk factors can affect the price of your insurance. Here are some of the main ones.

Your driving history

If you’ve been involved in a road traffic accident since your last quote, you might see your renewal price go up.

Even if it wasn’t your fault, your insurer will need to consider any previous claims when calculating your risk as a driver.

Points on your licence

The same goes for points on your licence. The more you have, the more likely that your insurance cost will rise. Depending on the type of penalty, some points can stay on your licence for years.

If points do get added to your licence, be sure to declare them. Otherwise your insurer might not be able to pay out if you make a claim.

Your vehicle

If your car or van is worth a lot of money, you may end up paying a bit more for your insurance. That’s because it would cost your insurer more to repair or replace it if it got damaged.

Expensive vehicles are also more likely to get stolen, as thieves tend to target cars that are worth more. This increased insurance risk can add to your renewal quote.

The same goes for powerful vehicles. If your car has a large engine capacity, or has been modified to make it go faster, your insurer might think you’re more likely to be involved in a collision.

Where you live

Insurers use your postcode and where your vehicle is parked at night to help calculate your risk profile.

If there’s a high crime rate in your area, or your vehicle is parked on a busy street (as opposed to a locked garage), you may end up paying more for your insurance.

So if you move address before your renewal quote is due, always check to see how it will affect the price you pay.

Criminal convictions

Even if you’re convicted of a non-motor-related crime, there’s a good chance your costs could go up. Criminal convictions add to a more risky driver profile, so your insurer will take that into account when calculating your quote.

It’s worth noting that some insurers will also want to know about spent convictions, so be sure to check what you need to declare.

How to manage the cost of your insurance

Things like inflation and the global economy are obviously beyond your control. But, by managing your risk as a driver, you can help to reduce the amount you pay for your insurance.

Here are a few things to get you started:

  • Try to keep a clean driving record and avoid points on your licence.
  • Add no claims discount (NCD) protection to your policy, so if you’re involved in an accident you won’t lose your discount.
  • Check whether your vehicle is driving up the cost of your insurance.
  • If you can, park your vehicle in a secure location overnight and let your insurer know where.
  • And check if you’re eligible for a Zego Sense policy — it’s our telematics insurance for good drivers (and it could save you some money).

What’s Zego Sense?

Zego Sense is our smart insurance policy that rewards good driving with lower prices.

It works with the Sense app, which uses your smartphone’s sensors to track how well you drive — things like your cornering, braking and accelerating.

Drive safely and you’ll build a high driver score in the app, which means lower costs when you renew.

So, if you’re looking for private hire or business van insurance, you could save more by choosing Sense.

Just get a quick quote online, then download and install the app once you’ve bought your policy.

Learn more about Sense.