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, with the average driver now paying £924. Factors contributing to the rising costs include inflation, increased repair costs, the rise of electric vehicles, the ban on loyalty premiums, and more drivers on the road leading to increased claims frequency.

FutureCar Staff Oct 14, 2023 4:29 PM PT

Record high car insurance for electric car owners

Car insurance costs have reached a new high, with electric vehicle drivers paying more than a third compared to petrol or diesel alternatives. According to Confused.com, insuring a Tesla Model Y costs £1,421 annually, while a Vauxhall Mokka petrol option costs only £449.

Over the past year, prices have skyrocketed due to the high cost of insuring electric vehicles and the pressure of inflation. The average cost of car insurance has increased by 58% in just 12 months, equivalent to an additional £338 per person. Confused.com analyzed six million quotes and found that the average driver now pays £924, setting a new record.

There are several reasons behind the rising cost of car insurance. The adjustments to life after the pandemic and recent industry changes have had a significant impact on the amount drivers are paying. Inflation is also a major contributor, with the cost of vehicle repairs increasing by 33% to £1.5bn, reflecting rising costs including energy inflation. However, the impact of inflation is only being felt now due to supply lines and pricing for parts happening in advance.

The rise of electric vehicles has also played a role in the increasing insurance costs. While EVs are growing in popularity, they come with a higher price tag and more sophisticated machinery, making repairs more expensive. As a result, the higher cost of repairs is being spread across all motorists rather than just EV owners.

Another factor contributing to the rising prices is the ban on the "loyalty premium." 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 led insurers to increase the prices of their core products to maintain profitability.

Additionally, the increase in drivers returning to normal driving habits since the pandemic has resulted in more drivers on the road and an increase in claims frequency. As a result, insurers are paying out more than in recent years.

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

To save on car insurance, there are several strategies you can employ. Paying for your insurance annually rather than monthly can result in cheaper rates, as insurance companies often charge interest for spreading the cost. Increasing your voluntary excess can also lead to lower premiums, but it's important to ensure you can afford to pay it if you need to make a claim. Being accurate with your mileage and driving fewer miles can also help reduce costs. Enhancing your car security, such as installing a Thatcham-approved car alarm or immobiliser, can make your vehicle less prone to theft and result in cheaper insurance. Finally, using a price comparison site can help you find the best deal that suits your needs and potentially save you money.