Why has my car insurance increased?

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March 24, 2022

When you receive a renewal quote from your car insurer this year you will probably find that despite not having an accident or making changes to your policy, your car insurance gone up for no reason?!

So why does car insurance go up unexpectedly and why is insurance more expensive in 2022?

Why has my car insurance gone up?

If your car insurance has gone up for no obvious reason, economic-related factors could’ve increased your car insurance 2022 renewal quote.

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5 economic reasons that can increase your car insurance

Dual pricing ban:

The new rule changes to prevent ‘price walking’ - introduced on 1 January 2022 by the Financial Conduct Authority (FCA) - were expected to lower car insurance premiums. However, despite the introduction of the rules that many hoped would abolish ‘loyalty penalties’, most drivers have seen an unexpected increase in their renewal quotes by an average of 5%. This means that despite the FCA’s best efforts, shopping around and comparing motor cover quotes continues to be the best way to find the best bang for your buck.

Insurance Premium Tax (IPT):

IPT is a tax on insurance premiums that is paid by all insurers, the cost of which is passed on to their customers through premiums. IPT for motor insurance sharply rose from 6% to 12% between 2015 and 2017 leading to increased premiums for drivers. In 2022 the IPT for motor insurance continues to remain at 12%.

Uninsured drivers:

If you have the misfortune of being hit by an uninsured driver, because the other party’s insurance is non-existent you or your insurers will usually need to submit a claim to the Motor Insurers Bureau (MIB). The financial cost of these claims (paid out by the MIB) is passed on to law-abiding drivers through their premiums. So the next time you might happen to watch Police Interceptors, you’ll have even more reason to scowl at criminals caught driving with no insurance knowing that it’s you, a law-abiding insurance-paying driver, that ultimately pays for the consequences of their law-breaking behaviour. What’s more, if you’re hit by an uninsured driver and your insurance doesn’t include an ‘uninsured driver guarantee’, this can cause your No Claims Bonus to reduce by 2 years. What’s not to hate?!

Serious injury compensation claims:

When someone is seriously injured in a car accident or claims for a whiplash injury, an insurance company (or a solicitor) will calculate a compensation payout based on what is called the ‘Ogden discount rate’. The lower the percentage of the Ogden rate, the higher your premiums will be.

Covid 19:

Whilst lockdowns and less traffic on the roads made premiums cheaper at the start of the pandemic, since life has almost returned to normal, more traffic on the roads has led to more claims and has seen premiums increase by 5% (£25) in the last quarter of 2021.

You might like: 10 tips and tricks for lowering the cost of your car insurance

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What else can increase my motor insurance premiums?

In addition to the economic factors mentioned above, insurers will assess a policyholder’s ‘risk’ when calculating premiums and the higher risk you are (i.e. the more likely you are to have an accident and claim on your insurance), the higher your insurance costs will be.

15 risk factors that can increase your car insurance

Level of cover:

Whether you choose third party, third party, fire and theft or fully comprehensive insurance can affect the cost of your premiums and of course any add-ons such as legal expenses or courtesy car cover further increase costs.

Note: Fully comprehensive insurance can very often be cheaper than third party or third party, fire and theft so make sure you compare quotes for all types of cover.

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Making a claim:

If you make a claim on your insurance that affects your No Claims Discount then your premiums will go up as a result.

Criminal convictions:

Insurers always ask if you’ve got any unspent criminal convictions and if you have, these can have a significant impact on your premiums, depending on the severity of the conviction.

Driving convictions:

Points on your Licence but especially more serious convictions such as drink driving or dangerous driving can make your premiums sky high and even require specialist high risk driver insurance. 

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Living in a high crime rate area:

Despite not moving house, it could be that you live in an area in the UK where motor insurance prices have increased for 2022. According to the Northern Echo, areas in the UK where costs have increased the most over the last year include Scotland, the East Midlands, Eastern England and Wales.

Parking your car on a public road:

Your car is much more likely to be pranged if it’s parked on a public road as opposed to a driveway.

Being very young or very old:

If you’re a very young driver with little experience, you’re at a much higher risk of having an accident and this is reflected in your premiums. Also, if you’ve turned 80 years old within the last year, then you will typically see a significant increase in your premiums compared to what you paid when you were in your 70s or 60s.

Your occupation or losing your job:

Your job title can affect your premiums as can losing your job. Read more.

Car modifications:

Modifications to your car such as having your windows tinted can have a negative impact on insurance costs, as will something as simple as a football team sticker. For example, if you display your team’s sticker in your car, your car is much more susceptible to vandalism - especially if you’re parked on a public road for an ‘away game’. Read more: Modified car insurance.

Car’s value and age:

It goes without saying that an expensive new car is worth a lot more money than a clapped out Robin Reliant and potential full replacement and repair costs will be reflected in your premiums.

Car’s engine size or insurance group:

A more powerful engine puts you in a higher insurance group which means higher premiums.

Predicted mileage:

The more miles you travel on the roads, the more likely (at risk) you are of having an accident. So someone who drives 10,000 miles or more a year can expect to pay more than someone who only drives 5,000 miles per year.

Poor credit score and paying monthly:

If you can afford to, you should pay for your insurance in a lump sum in advance rather than by monthly instalments - especially if you have a low credit score.

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Excess amount:

The higher your excess payment the less your premiums so if you’re struggling financially, it might be a good idea to pay a higher voluntary excess and just hope and pray you don’t have an accident!

Notifiable pre-existing medical conditions:

After the age of 70, you have to renew your Driver’s Licence every three years and must declare to the DVLA if you have any pre-existing medical conditions that could affect your driving such as sleep apnea, vision or neurological problems. Certain medical conditions will make you a higher insurance risk and thus negatively impact your premiums.

Read: When is the best time to buy or renew car insurance?

How much will my car insurance go up after a claim UK?

New research indicates that your motor insurance premiums can increase by an average of £184 per annum after making a claim on your motor insurance.

How can I get cheaper car insurance?

Don’t auto-renew and search for cheaper quotes at least 3 weeks before your current policy expires or renews with a reputable comparison site like Bobatoo.

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