Why has my car insurance gone up?

Car insurance proces for drivers in the UK have risen in recent years, and there are a few factors that cause this.

To help you understand why these increases occur, we delve into some of the contributing factors and how you can help combat these rises.

Three of the main factors are:

• The increasing cost of repairing vehicles
• A change to the way compensation pay-outs are calculated in life-changing accidents
• And three increases in the rate of insurance premium tax (IPT)

Let's look at those in a little more detail...

The increasing cost of repairing vehicles

For several years the cost of repairing vehicles has been going up due to the increasing complexity of vehicles.

For example, damaging a bumper was once a simple repair, but now can be very costly as the bumper could well feature parking sensors as well as being covered by a large colour-matched section of plastic.

Another example is replacing a wing mirror as it probably now features an electric mechanism to move it in and out, an indicator and will also have the same paint colour as the vehicle.

Compensation payouts change

Compensation payouts are a key factor in increasing car insurance premiums. As repair costs rise and claims for personal injury become more expensive, insurers face higher payout obligations.

These increased costs are often passed on to policyholders through higher premiums.

To maintain profitability, insurance companies adjust their pricing structures, which contributes to the upward pressure on premiums.

Consequently, drivers may experience increased costs for their coverage over time.

Increases in the rate of insurance premium tax

To make matters worse, all of these factors are compounded by the Government’s decisions to increase the rate of Insurance Premium Tax from 6% in 2015 to 12% as of June 2017. This is still accurate as of March 2025.

This substantially increases costs for everyone, but especially those whose insurance is higher in the first place, notably younger and older drivers, as it is applied after an insurance company calculates the premium.

This tax increase adds to the overall cost of insurance, making it more expensive for policyholders to maintain coverage. As a result, rising IPT contributes to the ongoing increase in car insurance premiums across the country.

Factors that could impact price of car insurance

There are several other factors that can impact the price of your car insurance.

Here we have highlighted a few:

• Driving history: A clean driving record typically results in lower premiums.
• Age: Younger drivers, especially under 25, often face higher premiums due to their inexperience and higher risk of accidents.
• Location: Where you live affects premiums.
• Type of car: Expensive, high-performance, or rarer vehicles are more costly to insure.
• Annual mileage: The more you drive, the higher the likelihood of an accident, which could raise premiums.
• Coverage type: Comprehensive coverage costs more than other variations of insurance.
• No Claims Discount (NCD): A history of not making claims can earn you a discount, lowering your premium.

How do I combat this rise?

One way to help reduce the cost of your insurance, is to look into getting a black box insurance policy.

Black box insurance uses GPS technology to track the way you drive, with the aim of encouraging safer driving which in turn helps you lower your premiums.

Black box insurance is designed for inexperienced drivers of any age who have passed their driving test and are keen to prove they are safe on the road to help them get a lower premium, however, this type of insurance can still offer reduced premium-benefits for drivers of any age too.

An alternative is to borrow a famliy member or friend's car and take out temporary car insurance, to cover you as and when you need it. Specialist types of insurance, such as learner driver insurance, could work out cheaper. 

In addition to these options, there are a number of tips, specifically new drivers, can take on board to try and reduce their insurance costs too, find out more in our guide on how to reduce the cost of insurance for new drivers.