Car insurance still feels unaffordable and what you can do about it

For many drivers, car insurance has gone from a boring renewal chore to a serious monthly worry. Even though some averages have started to come down, the cost still feels punishing – especially if you are young, live in a city or have had a claim.

Recent figures from the Association of British Insurers (ABI), reported by MoneyHelper, put the average annual premium at around five hundred and sixty two pounds, down about sixty pounds compared with the previous year. But this is still a big jump compared with a couple of years ago, and many people pay far more than the average.

MoneyHelper blog, September 2025:
https://www.moneyhelper.org.uk/en/blog/car-insurance/what-is-the-average-cost-of-car-insurance

Citizens Advice has warned that around 2.6 million people do not drive at all because they cannot afford cover, including almost nine hundred thousand who cancelled a policy in the last year. Their research also found that a quarter of people on benefits have fallen behind on car insurance payments, and many are borrowing or cutting back on essentials just to keep a policy running.

Citizens Advice press release, December 2024:
https://www.citizensadvice.org.uk/about-us/media-centre/press-releases/2-6-million-people-dont-drive-as-they-cant-afford-car-insurance-cost/

So why do premiums still feel so high, and what can you realistically do about it?

Why premiums jumped so much in the first place

The Financial Conduct Authority (FCA) and ABI data point to a combination of factors.

Repair and claim costs have surged

Modern cars are packed with sensors, cameras and complex electronics. ABI analysis shows that the average purchase price of a car rose by almost ninety percent between 2014 and 2024, while general consumer prices rose by less than forty percent over the same period. When a modern bumper or headlight is damaged, the repair is usually far more expensive than it used to be.

ABI blog on motor claims inflation, September 2025:
https://www.abi.org.uk/news/blog-articles/2025/9/motor-claims-inflation-causes-consequences-and-what-comes-next/

Economics commentary and insurer reports also highlight:

• higher labour costs in garages
• more expensive spare parts and longer repair times after recent supply chain problems
• rising theft claims for certain models.

See for example:
https://www.economicsobservatory.com/why-have-insurance-premiums-gone-up-so-much

When insurers are paying more per claim, average premiums tend to follow.

More claims and bigger losses in recent years

The FCA's general insurance value measures data shows that total motor premiums exceeded twenty billion pounds in 2024, with over forty four million policies in force. Premiums increased sharply between 2022 and 2024, putting extra pressure on households already dealing with the wider cost of living squeeze.

FCA multi firm motor insurance review, 2025:
https://www.fca.org.uk/publication/multi-firm-reviews/motor-insurance-claims-analysis-multi-firm-review-2025.pdf

A 2025 FCA press release notes that recent premium hikes have largely been driven by external cost pressures, but also criticises some firms for poor claims handling and not doing enough to support people in financial difficulty.

FCA press release, July 2025:
https://www.fca.org.uk/news/press-releases/premium-hikes-driven-claims-costs-insurers-told-improve-claims-handling

Inequality in who pays the most

Citizens Advice research has also highlighted that some groups are hit harder than others. Their report on car insurance affordability found that people on low incomes, younger drivers and some minority ethnic groups often face significantly higher quotes than the average driver, even after allowing for risk factors.

Citizens Advice report, July 2024:
https://www.citizensadvice.org.uk/policy/publications/popping-the-bonnet-exploring-affordability-issues-in-car-insurance-and-the-ethnicity-penalty/

That helps explain why, even when averages stabilise, many individuals still feel trapped by extreme prices.

Why premiums still feel high even as averages fall

The newest figures suggest that typical premiums have started to edge down, but for many drivers that is not yet visible.

• ABI data for spring and early summer 2025 shows average motor premiums around the mid five hundreds, down from the low six hundreds a year earlier.
  ABI Motor Insurance Premium Tracker, August 2025:
  https://www.abi.org.uk/news/news-articles/2025/7/motor-premiums-fall---but-repair-and-theft-costs-keep-revving-up-claims/

• An independent tracker using ABI data estimates that a typical comprehensive premium is still more than two hundred pounds higher than it was two years ago, even after recent falls.
  WeCovr car insurance inflation tracker, 2025:
  https://wecovr.com/guides/uk-car-insurance-inflation-tracker-2025/

On the ground, premiums still feel high because:

• You do not see the average – if you are young, have points on your licence, live in a high risk postcode or drive an expensive car, your quote will be well above the headline figures.
• The increase has been fast – many drivers are comparing today's quote with what they paid in 2021 or 2022, not with last year's inflated price.
• Other costs are up too – higher fuel, tax and general living costs make any insurance increase feel worse.

Citizens Advice sums it up bluntly: for a lot of people, car insurance has become a genuine affordability crisis, not a minor inconvenience.

Short briefing on unaffordable car insurance, December 2024:
https://citizensadvicehart.org.uk/car-insurance-increasingly-unaffordable/

Why paying monthly can make it even more expensive

Spreading the cost by paying monthly feels easier, but it usually means you are taking out a form of credit called premium finance.

A market review announced by the FCA in late 2024 highlighted concerns that many people pay annual percentage rates of twenty to thirty percent on this kind of finance, without realising they are effectively taking out a high cost loan just to pay for insurance.

News coverage of the FCA premium finance review, October 2024:
https://www.reuters.com/world/uk/uks-fca-launches-review-into-certain-insurance-payments-2024-10-16/

The regulator is now looking at whether this represents fair value under its Consumer Duty rules. In the meantime, guidance from MoneyHelper and consumer sites is clear:

• if you can afford to pay annually, you will usually pay less overall
• if you must pay monthly, compare the APR as well as the premium
• avoid adding optional extras you do not need, because these may also be financed at a high rate.

MoneyHelper overview of car insurance and paying monthly:
https://www.moneyhelper.org.uk/en/everyday-money/insurance/car-insurance-what-you-need-to-know

Practical ways to cut the cost without breaking the rules

While you cannot control repair cost inflation or regulatory decisions, you can control quite a bit about how you buy and use insurance.

MoneyHelper, Citizens Advice and comparison tools all give similar suggestions.

1. Shop around properly and at the right time

MoneyHelper recommends:

• using more than one comparison site, as they do not all show the same insurers
• getting quotes around three to four weeks before renewal if possible, as some insurers price earlier shoppers more favourably than last minute buyers
• checking quotes directly with insurers that are not on comparison sites.

MoneyHelper guide to finding car insurance:
https://www.moneyhelper.org.uk/en/everyday-money/insurance/car-insurance-what-you-need-to-know

MoneySavingExpert and other advisers also warn against simply auto renewing. Drivers who let policies roll on often overpay compared with those who compare and switch.

2. Check that the cover level actually fits you

There are three main levels of cover:

• Third party only – the legal minimum, covers damage or injury to others but not your own car
• Third party, fire and theft – also covers your car if it is stolen or damaged by fire
• Comprehensive – includes cover for your own vehicle even when an accident is your fault, plus other extras depending on the policy.

MoneyHelper points out that comprehensive cover is often no more expensive, and sometimes cheaper, than third party for many drivers, because people choosing bare minimum cover can be seen as higher risk. Checking the price difference is always worth it.

MoneyHelper explanation of cover types:
https://www.moneyhelper.org.uk/en/everyday-money/insurance/car-insurance-what-you-need-to-know

3. Use telematics if you are a careful but expensive-to-insure driver

For younger drivers and some higher risk groups, telematics or "black box" policies can sometimes bring big savings.

These policies monitor how you drive – for example speed, time of day, braking and cornering – and may cut premiums if you drive consistently well. MoneyHelper and comparison sites note that they are often most useful if you:

• are a new or young driver facing very high quotes
• mainly drive in the day on familiar routes
• are happy to have your driving monitored.

If you frequently drive late at night or have a long, varied commute, the benefit may be smaller.

4. Think carefully about adding named drivers

MoneyHelper and MoneySavingExpert both suggest that adding an older, experienced driver as a named driver can sometimes reduce the premium, especially for younger drivers in the family.

However, the main driver must always be the person who really uses the car most. Putting a parent or partner down as the main driver when a higher risk person actually uses the car is called fronting, and it is insurance fraud. If a claim reveals fronting, the insurer can refuse to pay and cancel the policy.

MoneyHelper blog on cheaper car insurance, November 2024:
https://www.moneyhelper.org.uk/en/blog/car-insurance/five-ways-to-lower-your-car-insurance-premium

5. Adjust your voluntary excess – but not too far

Every policy has an excess – the amount you pay towards a claim. Choosing a higher voluntary excess on top of the compulsory one can reduce the price, but only if you could genuinely afford that amount if you had an accident.

Consumer advice sites stress that you should never choose an excess higher than you could realistically pay from savings. If you cannot pay the excess, you cannot make a claim.

6. Remove add-ons you do not really need

Policies often come with optional extras such as:

• breakdown cover
• windscreen cover
• courtesy car upgrades
• legal expenses insurance.

Sometimes these are useful, but they can often be bought separately for less. MoneyHelper suggests reviewing add-ons at each renewal and removing anything that does not provide value for you.

7. Improve security and be honest about mileage

Simple things such as:

• parking in a garage or driveway if you have one
• fitting an approved alarm or immobiliser
• using a steering lock for high risk models

can sometimes reduce premiums.

At the same time, it is important to be accurate but realistic about your annual mileage. Grossly underestimating it to get a cheaper quote can cause problems at claim time. MoneyHelper suggests basing mileage on past MOT certificates or service records if you are unsure.

What to do if you simply cannot afford a quote

If the quotes you are seeing are completely unaffordable, it is important not to simply give up and drive uninsured. Driving without insurance is a criminal offence with severe penalties, including fines, points and vehicle seizure.

Instead:

1. Talk to an advice charity
   Citizens Advice and debt charities can help you look at your budget, check whether you are missing out on income and see if there are other costs you can reduce.

2. Consider whether you really need a car right now
   Citizens Advice research shows millions of people have already decided that they cannot afford to run a car. For some, giving up driving and using public transport, car clubs or cycling is the least bad option, at least for a while.

3. If a car is essential for work or caring responsibilities
   Explain this when you seek advice. In some situations, advisers may help you prioritise an affordable policy above other non priority spending and negotiate with creditors.

Citizens Advice affordability report, December 2024:
https://www.citizensadvice.org.uk/policy/publications/driven-apart-the-unequal-impacts-of-high-car-insurance-costs/

If you need to complain about poor treatment

The FCA's Consumer Duty and insurance rules require firms to treat customers fairly, offer products that represent value and handle claims promptly.

If you feel you have been treated unfairly – for example, a claim has been unreasonably delayed or a settlement seems far below the car's market value – the FCA expects you to use the firm's complaints process first. If you are not satisfied after eight weeks, you can take your case to the Financial Ombudsman Service.

FCA guidance on good and poor practice in insurance pricing and claims:
https://www.fca.org.uk/publications/good-and-poor-practice/price-value-outcome-good-poor-practice-update

A previous FCA warning to insurers emphasised that deliberately undervaluing write off claims is not allowed under the rules.

Summary of FCA focus on claims fairness:
https://www.brownejacobson.com/insights/the-word-october-2023/insurance-industry-consumer-duty-update

Key points to remember

• Car insurance prices have started to ease slightly on average, but many drivers still face far higher premiums than they did a few years ago.
• Rising repair costs, more complex vehicles, higher theft and general inflation have all pushed claims costs up, which feeds into premiums.
• Paying monthly usually means taking out high cost credit in the form of premium finance, which makes cover more expensive.
• You can often reduce costs by shopping around properly, choosing the right cover level, considering telematics, adjusting your excess sensibly and removing add-ons you do not need.
• Never be tempted to front a policy or drive without insurance – both can lead to serious legal and financial consequences.
• If quotes are unaffordable, get independent advice and look at your wider budget before making decisions about whether to keep a car.

You cannot control every factor that goes into your premium, but understanding what drives the price – and how insurers and regulators are responding – puts you in a much stronger position to avoid overpaying and stay safely on the road.