Will My Car Insurance Premiums Go Up In 2024? (2024)

Drivers have plenty to contemplate this year. Will insurance premiums keep rocketing? Will far-off conflicts feed through to higher fuel prices at the pumps? Will the transition to electric vehicles gain further momentum?

It’s no exaggeration to say that soaring premiums are pricing some people out of driving altogether.

According to the ABI, which represents 90% of UK insurers, the average annual private car insurance premium was £635 in Q1 2024, up 1% on the £627 of the previous quarter.

The ABI says rising premiums reflect increased insurance company costs – repairs are getting more expensive because cars are technically more sophisticated, they’re taking longer, meaning courtesy cars are given out for longer, and there are fewer qualified mechanics to work on the growing number of electric vehicles.

Theft of high-end performance and luxury cars is also pushing insurers’ costs ever higher.

The cost of writing-off damaged cars has also increased because of higher prices in the secondhand market, which insurers have to match. And insurers own costs – wages, commercial rents, energy bills and the like – are increasing, as they are for all businesses.

Professional services firm EY estimates that, for every £1 paid in motor premiums in 2022, insurers incurred £1.11 in claims and expenses. EY estimates that the figure rose to £1.14 in 2023.

Higher costs inevitably feed through to higher premiums. In a bid to address the situation, the ABI has unveiled a 10-point plan to ease the strain. But many of these measures require government intervention and will take months or even years to feed through to prices.

We’ve got more on this below.

What’s happening at the pumps?

Drivers are still paying too much for fuel, according to research from the government’s competition watchdog.

In its third monitoring update published 26 July, the Competition and Markets Authority (CMA) said drivers had been ‘overcharged’ by a collective £1.6 billion in 2023, owing to historically high margins being enjoyed by fuel retailers.

Its research found that retailers’ profit margins – the difference what it costs them to buy fuel and the price at which they sell it – were roughly double what they were in 2019. The CMA says a lack of competition among retailers is failing consumers.

The watchdog is pushing for legislation that would force fuel retailers to publish their prices and update them in real time, allowing drivers to use apps that would help them find cheaper fuel. It believes this could save the average driver £4.50 every time they fill up their tank

In the absence of any legislation, however, the CMA is relying on data being volunteered by fuel merchants. At present, only 40% of the market is voluntarily submitting real-time price data, meaning there isn’t enough data to power the CMA’s vision of app-based fuel price comparison.

Meanwhile, the CMA is urging the new Labour government to introduce an enhanced interim voluntary scheme that is as close to the final scheme as possible.

Sarah Cardell, chief executive of the CMA, said: “Last year we found that competition in the road fuel market was failing consumers, and published proposals that would revitalise competition amongst fuel retailers.

“One year on and drivers are still paying too much. We want to work with government to put in place our recommendation of a real-time fuel finder scheme to kick-start competition among retailers. This will put the power in the hands of drivers who can compare fuel prices wherever they are, sparking greater competition.”

Why are car insurance premiums going up so steeply?

• Repair bills are rising because of shortage of parts and associated price increases, alongside higher garage running costs such as energy bills and wages.
• Supply chain disruption means repairs are taking longer, which means drivers are keeping courtesy cars for longer.
• Sophisticated engines and control systems are more expensive to repair, both in terms of parts and labour.
• Electric cars – which now account for more than one million vehicles on UK roads – cost more to repair because of availability and expense of parts and shortage of skilled mechanics.

It is also the case that EVs may more readily be written-off by insurers, even after a relatively minor incident. This is either because the cost of replacing a damaged battery is prohibitively expensive, or theyare unable to determine whether the battery pack is damaged.

In such cases, the driver will receive the adjudged value of the car, which is likely to fall far short of the cost of buying a like-for-like replacement.

The price of electric car insurance has risen at an even more alarming rate than for traditional internal combustion engine cars, signalling that insurers do not want this business on their books.

One firm – Covea, which underwrites policies on behalf of John Lewis Group, among others – pulled out of insuring electric vehicles altogether in 2023, even refusing to renew existing policies.

Andy Moody, boss of short-term car insurance provider GoShorty, says: “With the shift to EVs, vehicle insurers will need to consider a huge variety of factors, such as the total value of the vehicle, details of the driver, plus other aspects such as the potential cost of repairs for the vehicle. These will all impact insurance premiums.

“Insurers will need to find the right balance between a fair price for comprehensive cover and not disincentivising consumers to choose an EV.”

What can you do to cut the cost of car insurance?

• Shop around two or three weeks ahead of renewal when the lowest quotes are available.
• Increase your voluntary excess, but not to the point where you can’t afford to pay it in the event of a claim.
• Reduce your annual mileage and consider a black box ‘telematics’ policy that rewards you with lower premiums if the data shows that you are a relatively safe driver from an insurance perspective.
• Pay upfront if you can as instalments work out to be more expensive – if the single payment is too much, consider using a 0% interest purchase credit card and clearing the debt in 12 months.

Autonomous vehicles

As well as developments in how contemporary cars are powered, drivers will also need to get used to their vehicles becoming increasingly autonomous. There are six recognised levels of automation, ranging from zero (no automation) to 6 (full automation, no driver necessary) but even the most advanced cars on the roads today are only in the foothills of Level 3.

Mr Rushby at Carmoola says: “Advanced driver-assistance systems, which help with lane control and collision avoidance, for example, will become more sophisticated, but Level 4 and 5 autonomy (no driver required) is still going to be several years away at least.”

He adds that the Law Commission is reviewing self-driving legislation, with a focus on liability and insurance implications. There are many threads to this – not least who picks up the tab if an autonomous vehicle causes an accident – which will take time, effort and expertise to knit into a body of law that works for all concerned.

Mr Moody at GoShorty says recent advances in artificial intelligence (AI) will play a part in accelerating the development of autonomous vehicles – and society in general will need to keep up with the pace of progress: “The integration of more sophisticated AI algorithms and machine-learning models is expected to enhance the decision-making capabilities of autonomous vehicles, to not only improve safety features but also enable these vehicles to handle complex driving scenarios.

“But consumer and regulatory concerns represent a huge barrier to this growth, with public opinion of autonomous cars remaining divided.

“Advancements in the autonomous vehicle space have been incredible, but from an insurance perspective, there’s still a long way to go. It will be some time before self-driving cars are common on our roads, and insurers in the UK will be carefully planning the insurance implications that they bring.

“Aside from insurance, autonomous vehicles have a PR problem to overcome before they win the trust of the public.”

Car connectivity

Another technology issue confronting drivers in 2024 and beyond is connectivity – the ability of cars to communicate with other software systems and collect data from their surroundings.

Mr Moody says this too could have implications for the cost of insurance: “From an insurance perspective, ever-increasing amounts of valuable tech in cars could see prices start to increase, but equally, having the potential to provide insurers with data about how well you drive could do the opposite.”