Why Has My Car Insurance Gone Up For No Reason in 2023?

Hundreds and thousands of British drivers have noticed their car insurance has jumped up considerably at renewal in 2023. But what are the reasons?

To save you some time, here are the main reasons insurance has gone up in 2023 and why it's not just insurers trying to fleece you:

• Increase in vehicle claims
• Increase in stolen vehicles
• Parts are more expensive to order due to backlog
• Parts are taking longer to order due to backlog
• Subsequently, customers are in courtesy cars for longer which costs insurance companies more
• Cars are generally more expensive (both new and used)
• Insurers paid out more than they took in last year (2022) in profits

Why Has My Car Insurance Gone Up For No Reason in 2023?

Hundreds and thousands of British drivers have noticed their car insurance has jumped up considerably at renewal in 2023. And lots of them are confused, as they've had another year of no claims, which usually lowers their insurance when it comes to renewal.

The Association of British Insurers (ABI) recently unveiled its quarterly report, revealing a substantial 29% surge in insurance payouts, subsequently driving an upward trajectory in insurance premiums.

Navigating the intricacies of car insurance remains one of the less enjoyable facets of motoring, and in recent times, it has become increasingly financially burdensome.

Premiums have witnessed an escalating trend, and perceptive motorists may have discerned that even when shopping around for alternatives to their renewal quote, relief remains elusive. So, what is the underlying cause of this predicament?

The most recent publication from the Association of British Insurers (ABI) casts some light on the quandary of car insurance. It refers to "record-breaking motor insurance payouts," which surged by a significant 29% during the second quarter of 2023 in comparison to the corresponding period in the previous year.

This surge translates to a staggering £2.5 billion for the quarter, equivalent to a daily expenditure of £28 million. Furthermore, the number of claims has surged as well, with 592,000 claims recorded, marking an 18% increase.

Several factors contribute to the rising cost of claims, including the escalating expenses associated with car repairs, which soared by 46% compared to Q2 2022. Additionally, repair durations have lengthened, necessitating the provision of courtesy vehicles for extended periods, thereby incurring a 52% rise in costs.

The expenditure linked to stolen vehicles has also surged by an astounding 53%, now reaching a total of £196 million. This is partly due to the fact that used cars now command higher prices than in the past.

However, there is a silver lining in the context of payouts for personal injury claims, as they have recorded a reduction of 8% compared to Q2 2022. The ABI observes that the introduction of whiplash reforms in 2021, aimed at establishing a simpler, fairer, and more cost-effective compensation system, appears to be yielding positive outcomes.

Nonetheless, it is worth noting that the average insurance policy premium has not experienced a proportionate increase to the 29% surge in payouts. Instead, it has ascended by 21%, reaching a figure of £511.

It is imperative to acknowledge that this figure may potentially rise further, as insurers strive to regain their financial equilibrium. According to a report from the consulting firm EY, UK car insurers operated at a deficit in 2022, and this trend is anticipated to persist throughout the current year.

EY anticipates a return to profitability by 2024, contingent on insurers' ability to recalibrate premium rates in alignment with the prevailing rate of inflation.

Essentially, this means your car insurance may drop back down to an acceptable range for 2024. But this year you will have to bite the bullet when it comes to paying the price to keep your vehicle insured on the road.