Your Guide to Insurance Prices
If you’re one of the many UK households that has seen a sharp rise in the cost of everyday essentials – from food to electricity and, yes, insurance – you’re by no means alone. Inflation has hit personal budgets across the country. And one place many have seen a particularly steep rise, is in their insurance premiums.
Our members’ trust means a lot to us, so we strive to be as transparent as possible about our prices. With that in mind, we’ve written a brief explanation of why the prices of insurance companies have shot up.
With supply chain challenges comes rising costs
As the cost of goods rises, so does the cost of claims. It’s a simple enough concept and one that has been used to explain price increases many times before. But in the motoring industry, the rising cost of claims is slightly more challenging.
New car technology adds complexity to claims
The cost of raw materials and car parts has risen steeply in the past 5 years. And as vehicle technology has become more advanced, the costs associated with replacing parts has risen even higher.
Replacing an analogue oil pressure gauge, for example, would be a relatively easy and inexpensive job, although pricier today than it might have been 10 years ago. However, in many modern cars, oil pressure is measured by digital technology, like a central Engine Control Unit (ECU)1. When something goes wrong with this sophisticated tech, the cost to repair and replace is much greater. And finding professionals with the expertise to work on advanced digital technology takes time; often with higher labour costs.
Claims on the rise in recent years
During the 2022/2023 financial year there was a 19% rise in vehicle thefts reported in the UK2. Reports suggest that keyless cars have been particularly targeted. Again, this technology is expensive to replace, contributing to the inflating cost of insurance3.
Add to this climate change and increasing numbers of accidents caused by using handheld devices while driving, and you have a perfect storm of high-risk environments.
How we’re keeping our prices as low as possible
The increasing premiums consumers are facing are caused by global conditions, and every provider is facing the same challenges. Without increasing prices, we’d be unable to offer you the service we promise.
But at the RAC, we’re doing everything we can to keep your insurance as affordable as possible – from offering premium-reducing options like Online Only insurance, to the range of savings that come with being an RAC member. Plus, we promise our renewing customers will never pay more than a new customer, based on the same details.
The good news is, as the world recovers from the industrial shock caused by events like the pandemic and the Ukraine war, supply chain trouble and the cost of materials should go down. And as the cost of fulfilling claims falls, we should start to see premiums reduce, too.