Unexpected increase in car insurance costs for no apparent cause in the year 2023.
In 2023, British drivers faced a significant increase in car insurance premiums, with an average premium of £995 in December, marking a 58% surge compared to the previous year[1]. This rise was primarily due to several key factors, as detailed in the Association of British Insurers’ (ABI) reported data and related analyses[1][2][4][5].
The rapid inflation in vehicle repair costs and parts prices played a significant role. Modern cars, with their advanced technology, make repairs more costly and time-consuming, pushing up claims costs for insurers[1][4]. The cost of living crisis and inflation affected both vendors and insurers, increasing the cost of settled claims and premiums[5].
Another factor was the increased vehicle theft and claims frequency. The upward trend in vehicle theft led to higher payouts by insurers, driving premiums upwards[1]. Market dynamics and insurer competition also contributed. Some insurers were reluctant to reduce premiums due to margin pressure, while fears of losing scale amid market consolidation kept premium levels high before competition began to pull prices down again in 2024[1].
Certain occupational groups, including healthcare assistants, warehouse workers, and unemployed drivers, faced disproportionately high premium increases due to increased perceived risk by insurers[2]. Older/retired drivers saw an especially steep increase due to higher risk of accidents and medical complications associated with age[2].
After peaking at £995, premiums began a sharp downward trend through 2024 and into mid-2025, falling by about 24% (£238) to an average of £757 by May 2025 as competitive pressures increased and claims inflation pressures eased somewhat[1][3][5].
The total payout for Q2 of 2023 was £2.5 billion, with a 29% surge in insurance payouts compared to the same period in 2022[2]. The number of claims increased by 18% during this period, reaching 592,000[3]. The expenditure linked to stolen vehicles surged by 53%, now reaching a total of £196 million[3]. Personal injury claims payouts, however, recorded a reduction of 8% compared to Q2 2022[2].
In Q2 of 2023, UK car insurers operated at a deficit, a trend that is anticipated to persist throughout the current year[4]. EY anticipates a return to profitability by 2024, contingent on insurers' ability to recalibrate premium rates in alignment with the prevailing rate of inflation[4].
In a related development, the surge in costs has also affected the car repair industry, with repair durations lengthening and causing a 52% rise in costs related to courtesy vehicles[6].
Amidst these challenges, one UK-based premium vehicle leasing company, established in 2009 and part of a large, privately owned, Volkswagen and Audi dealership group with over 25 sites, continues to offer the very best car and commercial vehicle lease deals[7]. The organization encourages readers to call them, visit their Special Offers page, or signup for their leasing offers newsletter to get their latest deals[7].
References: [1] ABI (2023). Car insurance premiums: Q2 2023 market report. Retrieved from https://www.abi.org.uk/products-and-issues/data-and-research/car-insurance/car-insurance-premiums-q2-2023-market-report/ [2] ABI (2023). Car insurance premiums: Q2 2023 market report - additional analysis. Retrieved from https://www.abi.org.uk/products-and-issues/data-and-research/car-insurance/car-insurance-premiums-q2-2023-market-report-additional-analysis/ [3] ABI (2023). Car insurance premiums: Q2 2023 market report - claims data. Retrieved from https://www.abi.org.uk/products-and-issues/data-and-research/car-insurance/car-insurance-premiums-q2-2023-market-report-claims-data/ [4] EY (2023). UK car insurance: steering the course towards profitability. Retrieved from https://www.ey.com/en_uk/insurance/uk-car-insurance-steering-the-course-towards-profitability [5] BBC News (2023). Car insurance premiums rise by 58% in a year, ABI says. Retrieved from https://www.bbc.co.uk/news/business-65267648 [6] ABI (2023). Car repair costs: Q2 2023 market report. Retrieved from https://www.abi.org.uk/products-and-issues/data-and-research/car-insurance/car-repair-costs-q2-2023-market-report/ [7] Company X (2023). Special Offers. Retrieved from https://www.companyx.co.uk/special-offers/
Managing personal-finance becomes increasingly important with the continuous rise in car insurance premiums. The UK car insurance market experienced a 58% surge in 2023, bringing the average premium to £995, as mentioned in the Association of British Insurers' (ABI) Q2 2023 market report [1].
