New figures have revealed that drivers are paying 11% more for new car insurance, with an average yearly premium of £500.
During 2022, new insurers taking out cover paid an extra 11% compared to 2021, figures from the Association of British Insurers (ABI) have revealed.
The opposite is seen for those renewing their policy, who paid 7% less than the previous year; this works out at £392 on average.
Drivers looking to renew their insurance are in a better position due to the Financial Conduct Authority regulator banning 'price walking' in January 2022. 'Price walking' has prevented insurers from charging renewing customers more than new customers.
With the ban in place, premiums have fallen for renewing customers and have become higher for new customers.
The final three months of 2022 have shown that the average insurance premium has increased by 8%.
ABI senior policy adviser, general insurance, Jonathan Fong, said: "Every motorist wants the best insurance deal, especially when coping with the cost of living pressures, and insurers continue to do all they can to keep motor insurance as competitively priced as possible.
"Yet, like many other sectors, insurers continue to face higher costs, such as more expensive raw materials, which are becoming increasingly challenging to absorb."
Why are insurance premiums rising?
Prices are beginning to rise for several reasons, the main one being that the insurers' own costs are rising.
With rising energy bills, insurers must pay £71.75 extra for each car after a crash. The cost of paint and materials has risen by 16%, along with the price of a courtesy car increasing by 30% and 40% of repair work being hit by delays.
Another part of the rise in car insurance prices is the UK returning to pre-pandemic norms.
During the Coronavirus lockdowns, car insurance prices fell due to insurers paying out fewer claims for fewer journeys. The UK's return to a pre-Covid way of life has meant more car journeys, more theft and crashes and therefore, higher premiums.
How to save money on your car insurance
There are several ways that drivers can see their car insurance price fall. Here we have broken down five of the best ways to save money during the cost of living crisis.
1. Shop around
This is the best way to reduce your insurance cost, and by switching, you can save hundreds of pounds by shopping around when renewing. With insurers no longer being allowed to charge renewing drivers more than new customers, you may not see a massive drop in price on a new policy, but you can receive a new policy with a new provider.
2. Consider getting a black box
For many young drivers, the best way to decrease the cost of insurance is by purchasing insurance with a black box fitted. With a black box policy, you would have a device that monitors your driving and is designed to reward careful drivers. A black box insurance policy can see premiums heavily cut once your ability to drive safely is proven. Some insurers even offer an upfront discount if you take out a telematics policy.
3. Be careful of how many drivers are named
One way to cut premiums is to ensure that only regular drivers are named on the policy. You will find that if you add a younger, more inexperienced driver, you can see your premium increase. The premium you pay will be affected by the youngest driver on the policy.
4. Pay yearly, not monthly
When taking out your policy, you will be given the option to pay annually or monthly. Whilst paying annually will see you spend a larger sum of money in one go, you save more in the long run. Several learners opt for monthly payments due to their financial situation, but if you can pay yearly, you can save money due to not having to pay interest on your payments.
5. Only pay for what you need
Some car insurance deals include extra benefits, such as a courtesy car, windscreen cover, breakdown cover and motor legal protection. All of these could come in handy, but they will almost always increase the cost of insuring your car.