Why are prices higher than last year?
The UK car insurance market is experiencing both a rise in the number of claims and a significant increase in how much they cost to resolve. Together, this is having a major impact on people’s insurance prices.
Did you know? The cost of vehicle repairs have jumped up 46% since last year, following the energy crisis and a rise in labour costs. (Source: ABI)
In October 2023, storms Babet and Ciarán reminded us how volatile the weather can be, causing flash floods and damaging vehicles. If you ever need to claim, we’re here to help - please visit our claims page.
It’s really important to us that we continue to put you first and give you the same great service you’ve come to expect. We continue to assess the value of our cover, and an increase in premiums is not something we take lightly.
What are some reasons for rising car insurance costs?
- Labour costs for repairs: up 50% since 2019, due to inflation, shortage of skilled workers and the energy crisis. (Source: Auto Body Professionals)
- Cost of vehicle repairs: up 46% since last year. Reflecting rising costs, energy inflation and more expensive repairs. (Source: ABI)
- Vehicle theft: up 20.8% last year compared to the previous year, leading to increased claims. (Source: data from ONS)
- Paint: prices went up 20% in 2022 and most claims require paint work. (Source: ABI)
- Courtesy cars: the cost of courtesy cars has jumped up 52% - an important part of our service. (Source: ABI)
- High-tech: vehicles with sensors, cameras and high voltage systems are raising the cost of replacement parts and also require specialist labour to fit.
- Long-term care: providing care for people with life-changing injuries (customers, other drivers, passengers and pedestrians) accounts for around 30% of our claims cost. (Source: LV= data)
Where does my car insurance premium go?
Our graph shows how a £450 LV= premium is spent. You might be surprised to see that just 3% was profit, while 71% went towards settling claims.
We use the vast majority of your premium doing what we do best, looking after our customers in their time of need. We're incredibly proud of this and it's something we'll continue.
Based on 2022 LV= data
How insurance pricing works
- We know it’s frustrating to see an increase at renewal, especially if you haven’t claimed. It’s partly down to how insurance works. Everyone’s premiums combined have to be able to cover the costs for those unfortunate enough to have to claim. That’s why price increases can affect everyone – even if you haven’t claimed.
- Trends like the number of claims from previous years, expected claims in future years and how much they could cost, are factored in. Increases in things like the number of cars on the road, theft, fraud and repair costs are also taken into account.
- Insurers aren’t making huge profits. Here at LV= we’ve been impacted by these changes, too, and we’re finding new ways to reduce the impact it’s having on our customers.
We pay out on over 99% of motor claims.
What are the costs involved in a car claim?
Car insurance pays for all sorts of things, like replacing windscreens, repairing damage and even cover for injuries following an accident. In fact, as the chart below shows, personal injury claims made up 33% of LV='s total claims costs in 2022.
Due to the rising cost of energy, it takes on average £80 worth of electricity to repair a damaged vehicle during a claim. The same amount would power the average British household for 3 weeks.
What can car insurance claims pay for?
Please check your individual cover as policies can differ.
If you're an existing LV= Car or Home customer, you can be sure you'll always pay the same or less than one of our new customers when you renew. Your quote will be compared to a new customer price on the same day your renewal was generated, based on the exact same cover.
Why is my renewal price different to last year?
If your renewal quote is different to last year you might be wondering why, especially if you’ve not made a claim. Even if you’ve not moved house, bought a new car or changed your cover level over the last year, your property or vehicle is a year older now which does make a difference to your quote. Here are a few other things worth considering too…
Your claim history
Changes in circumstances can mean your insurance price will go up, for example if your chances of needing to make a claim have gone up. If you’ve been involved in an accident (even if you didn’t make a claim) then you’re statistically more likely to make a claim in future. And if you do need to make a claim and haven’t protected your no claims discount, you could lose some or all of your discount at renewal.
Your driving history
For car, van and bike insurance, we can’t ignore any changes to your driving record. For example, if you’ve had a speeding conviction over the year it'll be reflected in your price as driving or riding too fast increases the chance you'll have an accident. On the other hand, a clean driving record can mean you get a lower price at renewal if you’ve not made a claim or your no claims discount has increased. It works both ways!
Increased repair costs and taxes
As technology improves in modern vehicles, we can all look forward to safer, more economical living. The downside to this is that things are generally more expensive to repair and replace. Insurance companies also have to pay taxes and levies that are set by the government or industry bodies. If these change at all, this can impact your renewal quote.
Accident and crime rates
Even if you’re the best driver or rider in the world, the accident and crime risk in your area is still a factor. If the chances of someone crashing into you or stealing your vehicle goes up or down, it can affect your price.
Changes in legislation or regulations
Legislative and regulatory changes can also have an effect on your car insurance premium. Read our FAQs to find out more.
The Association of British Insurers (ABI) have gone into a little more detail around insurance pricing.