Car insurance cover has increased by four percent over the past three months alone and motoring experts warn policies could even break records by the end of 2020. The overall highest car insurance average price was set at £858 in 2011 and current figures put the cost just five percent lower than exceeding the record sum.
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Current charges are the highest yearly average costs for two years.
Policy costs are calculated through several factors such as your job, crime rate and road experience.
But as prices continue to rise, some people may be wondering why their car insurance policy may seem so expensive.
Why have car insurance prices risen?
Changes to the Ogden rate in August 2019 saw prices begin to slowly increase as car insurance companies aim to earn back the finance they pay back to claimants.
The Ogden rate determines how much compensation is paid to road users in the event they have a crash and claim on a policy.
This ratio changed from -0.75 percent to -0.25 percent which means companies must pay slightly higher payouts on any claims they receive.
Immediately after the change, car insurance premiums were increased by 0.7 percent over three months as total costs were two percent higher than in 2018.
Areas of London saw the highest increase as a result of Ogden rate changes with a 3.6 percent raise over twelve months from September 2019.
Does where I live affect my car insurance costs?
Location is one of the most important factors in car insurance prices with drivers in some regions paying more than double the cost of others.
According to Compare The Market, 90 percent of all car insurance claims are made within five miles of the customer’s home and means addresses are scrutinised before overall costs are revealed.
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Data from Confused.com revealed areas of London have seen the highest increase over 2019 with prices now eight percent more expensive than 12 months ago.
London motorists now pay an average of £1,260 for car insurance premiums making it the most expensive area of the UK.
However, road users in Scotland are only charged an average of £652 – prices almost half of those paid by London residents.
The crime rate is the big factor, as an area with more incidents is likely to increase the perceived risk of getting your car stolen or damaged which will directly affect premiums.
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What will affect my car insurance price?
Other factors such as your job, annual mileage and how you use your car are all likely to affect your car insurance costs.
Policyholders will charge more for their car insurance agreements if motorists admit to using their vehicle more often than most people.
Annual mileage is used to work out how often you are using your car while commuters and those that use a vehicle as part of their business may need special car insurance agreements to ensure they are protected.
Your age is also a vital factor in setting car insurance agreements with younger motorists set to pay higher charges.
Average costs for younger motorists have generally started to fall due to increased demand in black box telemetry systems which monitor your driving and set their prices accordingly.
However, elderly drivers can still secure the cheapest cover on the market as they are considered to be the most experienced and therefore at the lowest risk of claiming.
Compare The Market shows 40 percent of young drivers have a crash by the time they are 23 years old which means they are or likely to make a claim on their policy.
Prices are dramatically increased for this age group so companies can quickly build up enough money to pay for repairs for when an accident occurs.
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