According to figures from the Association of British Insurers (ABI), the average premium from April to June 2026 was £566, up 1% from the previous quarter.
Although premiums are still cheaper than two years ago, insurers paid out £3.2 billion in car insurance claims during the second quarter of 2026. The average claim payout increased to £4,900, up 4% on the previous quarter.
The ABI say modern vehicles are more costly to repair due to the vast array of technology, integrated sensors and cameras and time it takes to fix them by specialised technicians.
Modern parts are expensive and are also attractive to thieves. Badge thefts, headlights and other high-value parts are being targeted, with VW badges costing £1,500 – £2,000 to replace as it contains radar sensors. These must be precisely calibrated to a vehicle’s vehicle systems (how did we manage to drive without them years ago!).
ABI releases quarterly data based on what drivers pay for their car insurance rather than quotes.
Why has car insurance gone up?
Reasons given including increased car use post-Covid, the Ukraine war, a shortage of microchips, higher second-hand car values and higher labour and repair costs.
Soaring pothole-related claims are also to blame, with Admiral citing the average repair bill now £3,070.
The loyalty penalty
The loyalty penalty is the difference between what loyal and new customers pay for the same service. The Financial Conduct Authority (FCA) banned this in January 2022 so existing customers were not penalised for loyalty to subsidise new customers.
The FCA estimated that these measures would save £4.2bn over 10 years and make the market fairer and more transparent. Prices have risen to compensate for the losses, contrary to hopes that prices would fall.
The industry has profited from loyal consumers for years, only to pass the costs on to all of their customers when the regulator tried to introduce a fair and level playing field.
Opaque pricing and algorithms
Nobody truly understands how premiums are priced. The FCA cited concerns about this in 2019.
Premiums are priced based on complex algorithms which the industry will not openly unveil for fear of being accused of discrimination.
Top tips to save money on car insurance
Do not auto-renew
Make a diary note to start checking for renewal quotes 21 days before your insurance expires. This is known as the ‘sweet spot’ when you are likely to get the best price.
Use various online comparison sites.
TopCashBack
See if you can get cashback via TopCashBack to reduce your premium further. TopCashBack will track your purchase via an affiliate link to your insurer and give you cashback once you have completed the transaction.
I can recommend this. I saved £36 by using TopCashBack and reduced my premium by 15%.
Haggle
Haggle on your renewal quote. I saved £51 within 15 minutes by doing so last year.
A Which? survey of 2,000 motorists found that two thirds of those who contacted their car insurer to discuss a quote walked away with a cheaper premium offer last year.
Sam Richardson, Editor, Which? Money, said:
“Far too many of us take our car insurer’s renewal quote at face value, when we should really be looking at it as an opening offer. Just a quick call to your insurer when it’s time to renew could pay real dividends, with most people in our survey finding the experience of haggling straightforward.
“Insurers factor price negotiations into their premiums, so if you’re not benefiting from a discount, the unfortunate reality is that you could well be funding someone else’s.”
Be polite, play on the loyalty factor, say how delighted you have been with the service over the years and how reluctant you would be to leave.
Never accept the first offer. Ask ‘is that the best you can do?’ You may be put on hold while they speak to a Manager (usual ploy), before going a bit lower.
Aim to get the admin fees cancelled
It does not cost £25 or so to set up an insurance policy. Get these cancelled when you are haggling.
Pay a higher excess
Nobody likes paying a higher excess in the event of a collision. Do comparisons to see if it is worth your while accepting a higher excess for a reduced premium.
Pay your car insurance annually
Pay your car insurance annually. Paying monthly may cost you up to 30% extra as it is classed as a loan and finance agreement. Use a 0% credit card to pay it annually and set up a Direct Debit to split it into monthly repayments if you cannot afford to pay it in full.
Secure your car
There are many cheap and easy ways to prevent your car from being stolen. You can cite these to your insurer, who may reduce your premium and risk.
Build up your no-claims bonus
Drive carefully and build up your no-claims bonus (and protect it!). Protecting your no-claims bonus will provide you with extra peace of mind if you have to make a claim.
Downgrade to a cheaper car with a smaller engine
Do you really need to drive a bigger car? Choose a car that suits your needs and lifestyle.
Change your job title
Honesty is the best policy with insurance policies as being untruthful can invalidate your policy in the event of a claim.
That doesn’t stop you from tweaking your job title to “barber” instead of “hairdresser”. Be a bit creative and see if it makes a difference!
Bundle your home and car insurance policy
Many insurers will offer a discount for bundled home and car policies. Always do price comparisons separately each year to ensure you get the best deal.
Consider a black box car insurance policy
These policies are primarily aimed at younger drivers. The device monitors the driving style using complex algorithms to assess the risk and future premiums.
They are not fool-proof and there are pros and cons, but it can work well depending on your circumstances.
Fit a dashcam
Insurance companies will often offer discounts on car insurance to motorists who have dashcams fitted.
Reduce the extras
Do you need breakdown cover? Main dealerships may offer free cover with each annual service. Banks often offer extras that you do not have to duplicate. Shop around. Insurance companies use the add-ons to make extra money from you.
Limit your mileage
Keep your mileage down. You will be considered a lower risk if you drive less.
Don’t lie about your estimated mileage as this can easily be checked online on the UK Government MOT history check, which records the annual mileage on each MOT.
Choose fully comprehensive car insurance cover
Fully comprehensive cover is often cheaper than third-party cover and gives you extra peace of mind.
Add a more experienced driver
Adding a more experienced driver can reduce your premiums, although ‘fronting’ can invalidate your policy. This describes putting a more experienced driver down as the main driver as a ‘front’ for the younger driver who is really the main driver.
There are other risks to consider which can invalidate your car insurance.
Manual -v- Automatic – which is cheaper to insure?
Automatic cars are often more expensive to insure than manuals because they cost more to repair. Automatic gearboxes are complex, and replacement parts and labour costs are higher if there’s a collision or mechanical fault.
According to Compare the Market, the average premium for automatic cars in early 2025 was £765.83, compared with £585.26 for manuals – around 30% more.
The gap is expected to narrow as more drivers switch to electric and hybrid vehicles, which are almost all automatic.
If you passed your test in an automatic car, you are restricted to driving automatics. But if you passed in a manual, you can drive both, giving you more choice and potentially cheaper insurance.
It’s always worth comparing both options when you get a quote – you might be pleasantly surprised.
Special considerations
If you’re over 70, don’t assume premiums will be sky-high. Although insurers may take the view that reactions slow with age, experience and fewer miles may help offset the risk.
Specialist insurers such as Saga and NFU Mutual cater for older drivers.
If you have driving convictions, health conditions or a criminal record, you must declare them.
Non-disclosure is taken extremely seriously, will likely invalidate your policy and may lead to prosecution.
Finally
You are likely to get a better deal if you bundle your car and home policies.
These are my top tips to help you save money on your car insurance. Can you add anything to this?
Fantastic and comprehensive advice. I have used some of these tips to great effect in the past but there is definitely a few gems in this article I hadn’t thought of.
Thanks Scott.