When will car insurance premiums go down?
Let’s ask the question on everyone’s mind – will car insurance premiums drop during 2025? With record-breaking costs in 2024 motorists are eagerly awaiting a sense of inflationary calm in the market.
Changes on the horizon – including adjustments to compensation calculations and evolving market conditions – may bring a glimmer of hope.
Big premium rises in 2024
In 2024, we saw record-high insurance premiums reaching £1,361 as an average. That was a staggering 40% increase on 2022. Factors such as inflation, rising repair costs for high-tech vehicles, parts shortage, labour cost increases, increase in fraud, keyless thefts, worsening storm weather damage and prolonged claims settlements all contributed to the surge.
And all these pressures meant insurers spent more on claims and costs. Data from the Association of British Insurers (ABI) shows insurers paid out £3bn in motor insurance claims in the third three months of 2024, up 14% on the £2.5bn paid during the same quarter last year.
Factors including where you live still determine how much you pay for car insurance and unfortunately for some, certain areas skyrocketed in insurance costs. According to Confused’s data for the third quarter of 2024, Inner London tops the charts as the priciest area for car insurance, with an average premium of £1,357. In contrast, Wales offers the cheapest rates, where the typical premium is £682—almost half the cost compared to London.
Younger drivers face significantly higher costs for vehicle insurance. So, a 17-year-old now typically pays around £2,727 annually—a 4% increase from the previous year. This is why many younger drivers are considering insure-by-the-hour or day types of cover, waiting for premiums to come down to a more affordable rate. Or get that little bit older!
As drivers gain experience, premiums generally decrease. By age 23, the average cost drops to £1,671, and by the time drivers reach 45, the average premium is reduced further to £814.
Storm damage to vehicles
From flooded homes, to fallen trees and debris on cars, we’re facing an increasing risk tied to extreme weather events. Winter snow, gailforce winds, ice, storms and heavy rainfall can cause severe damage to your car. In addition to the risk of a tree falling on your car, poor weather can contribute to engine failure, malfunctioning brakes, broken lights and rust, all adding an extra risk to remaining safe on the road.
And of course, potholes are rife this time of year, posing an extra risk on top of everything else.
It’s more important than ever to consider storm damage when it comes to covering your vehicles, to ensure that if you do have to claim, you’ll be fully covered for it. You can also look at whether claims like pothole damage affects your No Claims prior to taking out a policy. Consider how replacing a tree-smashed windscreen yourself can set you back a small fortune, it’s important to ensure that you don’t try to save in the wrong places.
Will car insurance go down in 2025?
While some headlines are saying car premiums could drop by £50, our data may indicate more modest savings. While inflation has come down, we can see that drivers, on average, are still being quoted around 50% more than they were two years ago.
When we look at the difference between renewal quote prices and the premium drivers paid in 2023, more than half of our clients aren’t seeing premium rises – or reductions – at the moment. Could this mean that the marketing is starting to stabilise at the very least?
One potential price drop could come about due to a change in how personal injury compensation payouts are calculated. Analysis by price Waterhouse Cooper indicates that this change could see car insurance premiums drop by an average of £50. And while a decrease is welcome, and possibly a little bit hopeful, for most people that would still only be a drop in the ocean.
Other experts are less convinced, with some still predicting a 6% increase in average premium prices.
As a broker, every year, we will look at our client’s existing policy to see if it still offers the right cover – and question whether it is still competitive. By working with a wide panel of insurers, we have to view a range of policies to help ensure it’s still the right fit.
Is your cover up to scratch?
The new year is a good time to review your car insurance policies, to make sure they’re truly up to date and properly protecting you from rogue drivers to storm weather!
In a world of chatbots, comparison sites and call centres, so many of our clients tell us that the best part about working with Howden is the ability to speak to us in person or over the phone. Not only are we there to make sure that you understand all the options, to ensure you aren’t under-or-over-insured, we make a pretty good cup of coffee as well.
The great part about using an insurance broker, is that we do the hard work for you and we’re even there in the event of a claim! We’re even happy to check an existing policy you sourced elsewhere, whether to ensure you’re correctly covered or work with you to find the right price for your renewal, simply find your local branch here and give the team a call.
Sources: Which?, ABI, Parkers, Consumer Insight, Swinton.To learn more, solve any of your insurance queries or talk to one of our insurance experts, find your local branch here and give the team a call.
Sources: Which?, ABI, Parkers, Consumer Insight, Swinton.
This is a marketing blog by Howden.
