The relentless surge in the cost of car insurance is a matter of grave concern, placing an increasing financial burden on the UK public who are already grappling with the rising cost of living. Over the past decade, the rise in the cost of claims has outpaced increases in premiums by nearly three times, even when adjusted for inflation.

InsureDaily.co.uk has delved into the reasons for premiums increasing. In 2023, it said insurers incurred staggering costs, paying out £9.9billion in motor insurance claims - the highest annual figure since data collection began from the ABI in 2013. This extensive payout encompassed theft, repairs, replacement vehicles and personal injury.

Following insurers paying out high amounts in claims, the cost of vehicle repairs has also influenced the cost of premiums. In 2023, insurers paid £6.1billion for repairs, it said, a drastic rise of 31% from the £4.7billion paid in 2022. This surge reflects escalating costs, with some insurers reporting a 16% increase for materials and a 15% rise for labour.

Similarly, the cost of providing temporary replacement vehicles soared by 35% in 2023, costing insurers a record £597million, compared to £444million in 2022. Although motor premiums increased significantly over the past year for most drivers, this should start to calm down over the next year, InsureDaily said, with a marginal 1% increase showing for the first quarter of 2024, as insurers continue to grapple with rising costs.

Paul Daly, director of InsureDaily.co.uk, said: “We recognise that the rising cost of car insurance is a significant challenge for road users. Unfortunately, factors like the surge in repair and replacement vehicle costs are realities the industry has had to confront.

"Interestingly, the industry seems to have managed to reduce personal injury claims (down 8%) by bringing in new legislation in recent years that restrict claim amounts, but things like excessive costs for hire vehicles during repair periods (up 35%) still need addressing. While these increases are largely out of drivers' control, it's important to remember that there are still ways they can influence their own premiums.”

How to reduce your car insurance price

Compare insurance providers

It’s important to make sure that you never settle for the first quote you get. Premiums can vary greatly between insurers so it’s worth taking time to shop around and compare quotes from different companies to ensure you're getting the best possible rate.

Increase the voluntary excess

If you can afford to pay a higher voluntary excess in the event of a claim - this is the amount you are willing to pay towards a claim. You could reduce the cost of your premium. However, ensure that the excess is within your financial means to avoid potential future burdens.

Opt for borrowing a vehicle with temporary car insurance

Temporary or short-term car insurance can be an excellent cost-saving option, particularly for drivers who decide to share the use of a friend's vehicle. This type of insurance allows you to pay only for the coverage you need, rather than paying all year round when the car isn’t required. Short-term car insurance is flexible, so you can arrange insurance for a day, a week or a couple of months.

Improve your driving skills

Additional driving qualifications can demonstrate to insurers that you are a safe and competent driver - and some insurers offer a discount for this. Consider taking an advanced driving course, such as the Pass Plus scheme. This small investment can lead to significant savings in the long run.

Build up your No Claims Discount

Build up your No Claims Discount (NCD), or No Claims Bonus, is a significant factor in reducing your car insurance costs. For each year you're insured without making a claim, you'll earn another year's NCD which can typically offer significant discounts on your premium. Some insurers offer the option to protect your NCD, which can be a worthwhile addition considering the savings involved.