Record high car insurance for electric car owners.

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【Summary】Car insurance costs have reached a record high, with electric car owners paying up to three times more than petrol or diesel car owners. The average cost of car insurance has increased by 58% in the past year, equivalent to an additional £338 per person. Factors contributing to the increase include inflation, higher costs of covering electric vehicles, and the ban on the "loyalty premium" that has led insurers to increase prices.

FutureCar Staff Oct 13, 2023 9:30 AM PT

Record high car insurance for electric car owners.

Car insurance costs have reached a new high, with electric vehicle drivers paying over a third more than those with petrol or diesel cars. According to comparison site Confused.com, insuring a Tesla Model Y costs £1,421 annually, while a Vauxhall Mokka petrol alternative costs just £449.

Prices have surged in the past year due to the high cost of insuring electric vehicles and the impact of inflation. Car insurance costs have risen by 58% in just 12 months, equivalent to an additional £338 per person. The average driver now pays £924, setting new records as prices continue to rise, based on analysis of six million quotes by Confused.com.

There are several reasons behind the increasing cost of car insurance. Adjusting to post-pandemic life and recent industry changes have had a significant impact on premiums. Inflation is also a major contributor, with the cost of vehicle repairs rising by 33% to £1.5bn over the year, driven by increasing costs such as energy inflation.

The rise of electric vehicles has also played a role in the escalating insurance costs. EVs are becoming more popular, and some manufacturers have even announced plans to exclusively produce electric vehicles. However, these vehicles often come with a higher price tag and more sophisticated machinery, making repairs more expensive. As a result, the higher repair costs are being spread across all motorists, not just EV owners.

The ban on the "loyalty premium" has also affected insurance prices. In January 2022, the Financial Conduct Authority (FCA) prohibited car and home insurance providers from charging existing customers more to renew their policies. This has prompted insurers to increase the prices of their core products to maintain profitability.

Another factor contributing to the rising costs is the increase in drivers returning to their normal driving habits post-pandemic. With more drivers on the road, the frequency of claims has risen, resulting in higher payouts for insurers compared to previous years.

Inner London is the most expensive region for car insurance, with average prices now at £1,503, a 61% increase of £567 in 12 months. Outer London follows closely with average prices of £1,187, reflecting a 60% annual increase of £446. In Manchester and Merseyside, drivers are experiencing annual increases of around £417 (57%), bringing average prices to £1,154. The cost of car insurance in the West Midlands is now £1,139 on average, following a 63% increase of £442.

There are several ways to save on car insurance costs. Paying for insurance annually instead of monthly can result in cheaper premiums, as insurance companies often charge interest for spreading the cost over the year. Increasing the voluntary excess can also lead to cheaper insurance, but it's important to ensure that you can afford to pay it if needed. Being accurate with mileage is another way to save money, as driving fewer miles reduces the risk of accidents and claims. Enhancing car security, such as installing a Thatcham-approved car alarm or immobiliser, can also lower insurance costs. Using a price comparison site is recommended to ensure that you're getting the best deal and potentially saving money compared to a higher renewal quote.