Why is my car insurance so high? Here’s how you can save £££

The cost of living crisis has the UK asking, ‘Why is my car insurance so high?’ Here’s what’s influencing premium costs and what you can do to save £££.
Why is my car insurance so high?

If you’ve been surprised by ballooning car insurance rates, you’re not alone. As the cost of living crisis lingers, car insurance costs continue to put pressure on UK households. Inflation has impacted every piece of infrastructure supporting auto insurers, leading to sky-high premiums for many consumers.

Here, we’ll dig into why your car insurance costs are high, and what you can do to reduce the burden.

What’s driving car insurance costs up?

See what we did there?

There are a lot of reasons your car insurance costs could go up. However, if you haven’t had a crash and your insurance rates are going up anyway, inflation is the most likely culprit.


Inflation is impacting everyone, and auto insurers aren’t excluded. They can’t absorb those costs, so they’re passed on to customers. This manifests in various ways, but many of them are actually downstream from your insurance.

For example, say a mechanic’s lease or interest rate increases. They would have to charge their customers more. Then, your insurer would end up paying more than they anticipated, and they’d have to charge you more for your insurance. This is what’s being seen across the UK now, with the cost of payouts being higher on average than your insurance premium costs.

As the cost of parts, repairs, courtesy cars, and everything supporting those factors increases, insurers are trying to keep up. As a result, your car insurance rates increase accordingly.

What else affects your car insurance costs?

Numerous other factors influence how much you’ll pay for insurance. Some major factors include the following.

Your age

From a statistical perspective, younger drivers are more likely to make an insurance claim. If you just got your driving licence or have only had it for a few years, you could easily be paying upwards of £850 a year for insurance, according to NimbleFins

Although this factor is out of your control, it will go down over time if you have a history of safe driving.

Where you live

Different areas come with different risks for car insurance companies. Chaotic urban traffic, dangerous roads, crime, and your area’s accident history are just a few local factors that can influence your auto insurance costs.

For example, car insurance costs can easily approach or surpass £800 in London, while they may be closer to £400 in Devon or Cornwall.

Your job

Your car insurance could cost more depending on your profession. Essentially, if you’re on the road a lot for work, you’re more likely to be in a crash. Jobs in construction, banking, and delivery or courier roles tend to see higher insurance rates than roles in secretarial work or academia.

How you can reduce your car insurance costs

While many of the factors influencing your auto insurance rates are beyond your control, there are some things you can do to reduce its burden.

Improve your credit score

While research in the area is limited, studies have repeatedly confirmed that lower credit scores are a predictor of claims (or losses, as the insurance companies would put it). As a result, your premium will be higher if your credit score is low.

Improving your credit score could decrease the rate that you’re offered.

Start building your credit in 3 minutes

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Pay your premium in full

Monthly payments mean that you’re entering a credit agreement with your insurer. This can cost you in two ways.

  1. First, it leads to a hard credit check being carried out. A hard credit check will have a brief, negative impact on your credit score. If you pay in full, your insurer will only perform a soft credit check which doesn't have a negative impact on your credit score. 
  2. Secondly, auto insurance companies will charge you interest if you pay monthly, leading to an overall higher cost.

Paying in a lump sum avoids entering a credit agreement and being charged interest. If you can afford to pay your premium in full, it’s a smart choice.

Related read: What’s the difference between a soft credit check and a hard credit check

Drive less

Think about this from an insurance company’s perspective: who’s more likely to be in a car accident? A driver who’s on the road 30 hours a week, or someone who commutes a total of three hours a week?

If you drive less, you pose less of a risk to the car insurance company. Consider reducing your miles or taking out a low-mileage policy if you don’t drive very much right now.

Bid farewell to the sports car

Powerful cars can offer you a thrill if you’re behind the wheel. But to auto insurers, they have ‘risk’ written all over them. This is because auto insurers categorise vehicles into ‘groups’ based on the risk associated with them. Vehicles with high-powered engines are considered to be more risky, and are therefore more costly to insure.

If your car insurance costs are a burden, consider looking into a vehicle with a smaller engine size.

Before you make a decision, check out our guide to car financing!

Increase your excess

You’ll pay less for your insurance each month if you take on a higher excess or out-of-pocket cost in the event of a claim. This is because you’re transferring some risk from the insurance company to yourself.

However, don’t take on a higher excess if you don’t have an emergency fund or the means to cover your out-of-pocket costs if something happens. 

Shop around for a better rate

When you’re looking for auto insurance or your policy is up for renewal, shop around. While so-called loyalty premiums were banned by the FCA in 2022, renewing your policy with the same insurer could still end up costing you more. Loyalty doesn’t pay when it comes to auto insurance.

When you’re looking around for a good deal, look for policies that offer discounts for going a certain period without a claim, or for installing a telematics device to monitor your driving.

Build your credit score to save on car insurance costs

While inflation is the biggest factor causing car insurance rates to increase, it’s a good idea to do everything you can to save on your premium. Unlike your age, you have control over your credit score. If you have a low credit score, building it could decrease your premium’s cost. Pave can help you get started.

To see why over 300,000 Brits have turned to Pave to build their credit without taking on debt, download the app today.