Why is my car insurance premium so high?

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Why car insurance is expensive

The price of car insurance depends on how much of a “high risk driver” an insurer thinks you are. Insurers look at a lot of different factors to work this out, like your age, job title, the car you drive, and where you live.

Let’s look at these factors (and a few more!) in a bit more detail.

Why car insurance is expensive

Your age

Your age can make a big difference to your price.

Young drivers pay more for car insurance than older, more experienced drivers. That’s because younger drivers (on average) have more accidents than older, more experienced drivers.

Under-25s tend to pay a lot. And then the cost gradually gets lower as you get older.

There are a few ways that younger drivers can try to get cheaper car insurance. They can:

Your vehicle

The car you drive can make your insurance premiums higher. Faster or more expensive cars tend to cost more, as well as high-performance cars with big engines. Cars with lots of safety features tend to cost less.

Cars are categorised into different insurance groups. The higher the insurance group, the higher your premium could be.

We've got a free insurance group checker, so you can see what insurance group your car falls into.

The age of your car doesn't directly affect your price, but it does go hand-in-hand with a lot of the things that do.

Newer cars tend to have more safety features, which is a good thing. But they also usually cost more to repair, which can make them more expensive to insure.

You can use our free car checker to find out more about your vehicle.

Mileage

Most insurance companies will look at mileage, too. Generally, the higher your annual mileage, the more you'll pay.

Write-offs

If you make a claim on your car and your insurance company doesn't think it's worth repairing, they can "write it off".

Write-offs are much riskier to insure. So if you buy a second-hand car that was once written off and has been repaired, you'll probably pay a lot more for your insurance.

Imported cars

Imported cars also tend to be more expensive to get insured - if you can get them insured at all.

It's because imported cars are often higher spec than ones bought in the UK. Plus, they don't fit into an insurance group.

Electric cars and hybrids

Electric cars and hybrids also tend to be more expensive to insure. That's because they use a load of technology that's really expensive to replace if your car gets damaged and you need to make a claim.

There's also a lot less data about how many claims people make for electric cars, so insurance companies tend to play it safe and bump up the price.

We can insure electric vehicles (up to insurance group 40), but some insurers don’t.

Modifications

If you modify your car, your insurer might bump up the price of your insurance.

The definition of a "modification" is pretty broad, so it's worth checking with your insurer before making any changes to your car.

And bear in mind that some insurers (like us) don't cover modified cars at all. If you get your car modified without telling them, they might cancel your insurance if you need to make a claim. 🚫

Your monthly payments

Paying for car insurance monthly rather than annually can be a lot more expensive.

That's because you're not actually buying a month's worth of car insurance at a time.

Instead, think of it like getting a full year of car insurance - but on credit. That means the monthly payments you make are more like repayments on a loan.

And, like most loan repayments, they come with interest, and late repayments will affect your credit score.

We don't think that's fair. That's why we've built a new kind of pay-monthly car insurance. There's no deposit, no interest, and you can cancel any time - without the fees!

Your driving history

Your driving history can also affect the price of your insurance. Past accidents and claims can make you appear “riskier” to insure — as can licence points.

Make sure you tell your insurer about any accidents or claims that you've had in the last 5 years, though. Undeclared accidents can seriously affect your policy later on — your insurer could cancel your policy, or even refuse to pay out a claim.

Your job title

Insurers look at claims data to see which professions are more likely to be involved in car accidents — so drivers in certain professions get higher premiums.

This has nothing to do with driving for work, because most car insurance policies don't cover driving for business purposes.

It's all about the historical data insurers have about how people in those professions drive.

If your car insurance price is particularly high, you might be able to cut a bit off your insurance premium by carefully choosing how you describe your occupation. But there's a big difference between this and lying about your job, which could seriously affect your cover if you ever needed to make a claim..

Your excess

Excess is the amount of money you have to pay when you make a claim. There are two kinds of excess: "mandatory" (or "compulsory") and "voluntary".

Mandatory excess is set by your insurer, and you can't change it. It's usually worked out based on a lot of different pieces of information.

But voluntary excess is adjustable. And the higher you set it, the lower you premium will be.

So if you have a voluntary excess on your car insurance, bumping up the amount you agree to pay could make your car insurance less expensive. Just make sure you choose an amount you can actually afford to pay, if you do have to make a claim.

Where you live

Insurers will also use claims and crime data in your area to work out how much to charge you. They look at how many:

  • Crashes and thefts take place
  • Uninsured drivers live there
  • Fraudulent claims are made

To work out how “risky” your postcode is. Most accidents happen within five miles of the driver's home — so if you live in a risky area, they’ll probably charge you more.

The external things

There are lots of boring industry reasons that car insurance is expensive, too.

Cut out the middle man for cheaper premiums

When you buy car insurance, there are a lot of parties involved. The chain usually looks something like:

customer → price comparison website → software house → insurance broker → underwriter

It's a long process. And at each stage, someone gets paid. This makes car insurance more expensive.

We've simplified things a bit. It goes:

customer → Cuvva → underwriter

Much tidier.

Fraud makes insurance more expensive for everyone

Insurance fraud is a big problem, especially in the world of temporary car insurance.

Whiplash claims alone costs insurers £2bn per year. Many of these claims are fraudulent, but whiplash is almost impossible to disprove, so insurers usually pay out.

This drives up the price of insurance for everyone. The Association of British Insurers (ABI) reckon that whiplash claims add about £90 a year to the average insurance policy.

(We're always doing our best to tackle insurance fraud. That's why we ask for pictures of you and your vehicle when you sign up. We're not being nosy.)

Crashes with uninsured drivers (~£30)

Many people get behind the wheel without car insurance. And that makes insurance more expensive for everyone else.

When an insured driver has a crash with an uninsured driver, someone has to pay out. And that someone is the underwriter of the insured driver.

Because of this, premiums get higher for everyone.

It's thought that uninsured drivers add £30 to the average insurance policy.

Why your car insurance premium suddenly went up

Sometimes it seems like your car insurance has gone up for no reason. Here's why that may have happened.

Rising insurance premium tax (IPT)

When you buy car insurance, you pay Insurance Premium Tax (IPT) rather than VAT. Like VAT, IPT is set by the government.

IPT is getting higher and higher. In 2011, it was 6%. And in 2017 and 2018, it was 12%.

For some kinds of insurance - like travel insurance - IPT is even higher, at 20%.

In time, IPT will probably line up with VAT. But we're not quite there yet.

The Ogden discount rate

The Ogden discount rate helps insurers work out how much compensation they have to pay for life-changing injuries.

In 2017, the rate changed from 2.5% to -0.75%, meaning insurers have to pay out much more. But in 2019, it went back to up to -0.25%.

Lower Ogden discount rates make car insurance premiums higher for everyone.

Misleading temporary discount rates

Some insurers offer very low premiums just to get customers through the door. Then they bump up the cost the following year and hope you won't notice. This is called “dual pricing”

We don’t do this. And luckily, it looks like other insurers might not be able to continue this unfair practice for long. The Financial Conduct Authority (FCA) have said they want to put an end to dual pricing — but they haven’t announced when it will happen.

Fair and flexible car insurance

If you want fast and flexible pay-monthly insurance, and an insurer that won’t rip you off with dual pricing, get a Cuvva subscription quote today.

There’s no deposit, interest, or cancellation fees. And with smart pricing, you could save up to ⅓ on your insurance.

Updated on 5th February 2021