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Car insurance premiums rise by a fifth as drivers warned about 'essentials' cover

Car insurance premiums rise by a fifth as drivers warned about 'essentials' cover
Matt Browning
Written By:
Matt Browning

The cost of car insurance has surged by a fifth in a year, with average premiums priced at £850, research reveals.

Premiums have risen by £132 since May 2023, with motorists aged over 80 feeling the biggest proportional squeeze, according to Compare the Market’s research.

That demographic saw car insurance policies increase by a quarter (the largest proportional rise) to £656. But it was young drivers aged between 16 and 24 who felt the biggest costly hike, with premiums shooting up by £310 in a year to £1,901.

Despite the annual increases drivers experience in covering their vehicles, monthly costs for cover have slowed down.

‘Car insurance premiums rise causing concern’

Policies in May cost an average of £80 less than they did in April, but the state of car insurance premiums is “understandably” causing concern for both age profiles, says Anna McEntee, director of Compare the Market.

McEntee said: “Typically, insurers consider motorists in both age groups as more likely to make a claim, which could lead them to see higher premiums. For those concerned about the cost of their motor premium, shopping around ahead of renewal is one of the best ways to try and save money on car insurance.

“We want to encourage older motorists who may be more inclined to stick with their existing insurer each year to compare prices ahead of renewal to see what deals are available.”

The hefty costs to cover your vehicle have forced many who are dealing with the cost-of-living crisis and ever-growing petrol prices to opt for stripped-back insurance policies.

Two-thirds of car insurers offer an ‘essentials’ policy, often excluding elements including windscreen cover, stolen key replacement and the option of having a courtesy car, a separate study from Fairer Finance showed.

Another drawback of these policies will be an uninsured driver’s promise, which guarantees you do not lose your no-claims discount and reimburses any excess paid if you’re in an accident with an uninsured driver.

‘Brand stacking is so providers stay at the top of the charts’

The rising number of those policies has led James Daley, managing director at the consumer group, to call on providers and comparison sites alike to be clearer with the small print.

Daley said: “This brand stacking is designed to ensure they can keep their name at the top of the price comparison charts – but it makes choosing the right policy all the more difficult for consumers. There’s no standard definition of an essentials policy, with some insurers stripping out windscreen cover, while others have raised excesses, or removed cover for lost or stolen keys.”

He also called for a minimum standard for some comprehensive policies so insurers stop continually stripping features back just to bring down the price.

Daley added: “Since many customers will opt for essentials cover due to the lower price, it is vital for insurers and comparison sites to be clear about the exclusions and limitations of these policies. People need to understand these restrictions at the time of purchase rather than at the time of making a claim. Customer trust will only further erode if the industry doesn’t address this.”