Why car Insurance is so high in 2023 and beyond?

Car insurance premiums are on the rise, and experts predict a 14% increase in 2023, with prices expected to stabilize only by 2025. This trend is primarily attributed to inflation, which has led to higher costs in vehicle repairs due to the surge in energy prices. Understanding the factors contributing to the increase in car insurance prices is crucial for drivers seeking affordable coverage. In this blog, we delve into the reasons behind the rise in premiums, the impact on consumers, and the various factors that influence car insurance costs.

1. Inflation-Driven Increase in Car Insurance Premiums:

The recent surge in energy prices has had a cascading effect on the cost of car repairs. Extracting and processing materials for replacement car parts, as well as running garages, require significant energy expenditure, leading to higher service charges and part prices. Consequently, insurers are forced to increase their premiums to offset the losses incurred from expensive accident repairs.

2. Extended Duration of Price Increase:

Insurers are striving to "catch up with inflation" by adjusting their prices to account for the rising costs of accident claims and repairs. Since car insurance policies are typically agreed upon and fixed for a year in advance, the premiums set earlier did not consider the extraordinary levels of inflation in 2022 and 2023. As a result, prices are expected to continue rising until 2025, when inflation is projected to fall to the target level of 2%.

3. Potential Impact of Expensive Car Insurance:
The escalating cost of car insurance raises concerns about affordability for drivers. The Financial Conduct Authority (FCA) is closely monitoring the situation, as a significant portion of society is already grappling with the cost of living crisis. Unaffordable insurance may prompt some individuals to either drive without insurance or opt for cheaper coverage with reduced protection. The FCA has been actively working to address motor insurance pricing issues and enforce rules related to price renewals.

4. Factors Affecting Car Insurance Premiums:
The calculation of car insurance premiums is based on various pieces of information provided by the policyholder. The insurer assesses the likelihood of a claim and its potential cost. Key factors include the individual's profession, address, annual mileage, voluntary excess, vehicle make and model, modifications, parking location, age, medical conditions affecting driving ability, driving and accident history, named drivers on the policy, and the type of coverage selected.

5. Average Car Insurance Costs:
According to the Association of British Insurers (ABI), the average cost to insure a vehicle in the first three months of 2023 was £478. However, this figure can vary significantly, and new drivers may face an average yearly insurance cost of around £1,400.

6. Determining Insurance Costs:
To find competitive insurance quotes, using comparison websites like GoCompare, Compare the Market, and MoneySuperMarket is often the most convenient approach. These platforms collect information on various factors and provide quotes from multiple insurers, saving time and effort for policy seekers. Additionally, insurers categorize cars into 50 insurance groups based on risk factors, such as speed, acceleration, safety ratings, security features, and claims data. Lower group numbers represent less risky vehicles to insure, while higher group numbers indicate more expensive coverage.

Q&A: Why are Car Insurance Premiums on the Rise in 2023?

1. Why did my auto insurance go up in 2023?
The increase in your auto insurance premium in 2023 can be attributed to the ongoing inflation affecting various industries, including the automotive sector. Inflation has led to higher costs for car repairs due to the surge in energy prices, which impacts the manufacturing and maintenance of replacement car parts. As a result, insurance companies have raised their prices to compensate for the increased expenses incurred from accident claims and repairs.

2. Why is my car insurance suddenly so high?
The sudden surge in your car insurance premium can be linked to the recent escalation in energy prices, which has affected the entire automobile ecosystem. From manufacturing car parts to running garages for repairs, energy consumption has become costlier, leading to increased service charges and parts costs. Insurance companies, in turn, have adjusted their premiums to cope with the additional financial burden brought on by rising repair costs.

3. Why does car insurance premium increase every year?
Car insurance premiums can increase every year due to the impact of inflation and the fluctuating costs associated with the automotive industry. As prices rise in general, the expenses for car repairs, medical costs for injuries, and other related expenditures also go up. Insurers need to adjust their premiums to account for these increased costs and to ensure they can meet their financial obligations when policyholders file claims.

4. Why do expensive cars have higher insurance rates?
Expensive cars often come with higher insurance rates due to their higher market value. When these luxury vehicles require repairs or replacements, the cost of parts and labor is generally higher than for more affordable cars. Moreover, luxury cars are often targeted by thieves, making them riskier to insure. Insurance companies consider the potential cost of claims and the risks associated with the vehicle when calculating premiums, leading to higher rates for expensive cars.

5.  Why do expensive cars have higher insurance rates?
Expensive cars have higher insurance rates primarily because of their higher market value. When a luxury or high-end vehicle is involved in an accident or requires repairs, the cost of parts and labor tends to be significantly more expensive compared to more affordable cars. Insurance companies take this into account when determining premiums to ensure they can cover potential claims adequately. Additionally, luxury cars are often targeted by thieves, which increases the risk of theft-related claims and further contributes to higher insurance rates.

6. Do BMWs have high insurance?
Yes, BMWs typically have higher insurance rates, especially the more expensive models. BMW is a renowned luxury car brand, and its vehicles generally come with advanced features, sophisticated technology, and high-quality materials, all of which contribute to higher repair and replacement costs. As a result, insurance premiums for BMWs are often higher to account for the increased expenses associated with these luxury vehicles.

7. Why are some cars cheaper to insure than others?
Certain cars are cheaper to insure than others due to several factors that influence insurance rates. Generally, cars with lower market values, good safety ratings, and lower probabilities of being involved in accidents or thefts are considered less risky to insure. Additionally, vehicles with lower repair costs, readily available and affordable parts, and a history of low claim rates tend to have lower insurance premiums.

8. Is insurance high on Mercedes?
Yes, insurance rates for Mercedes vehicles can be relatively high, especially for luxury and high-performance models. Like BMWs, Mercedes cars are known for their advanced technology, premium materials, and higher repair costs, which can impact insurance premiums. However, insurance rates can vary depending on the specific model, safety features, and the driver's profile.

9. Is insurance higher on luxury cars or sports cars?
Insurance rates are generally higher for both luxury cars and sports cars compared to standard vehicles. Luxury cars have higher repair and replacement costs, while sports cars are often associated with higher accident risks due to their powerful engines and higher speeds. However, within each category, specific factors such as safety ratings, theft rates, and the driver's profile can further influence insurance rates.

10. Do BMWs really need premium?
Using premium fuel in a BMW is recommended by the manufacturer, especially for higher-performance models and those with turbocharged engines. Premium fuel typically has a higher octane rating, which helps prevent knocking and improves engine performance in high-compression engines. While some BMWs may run on regular fuel without issues, using premium fuel as recommended can optimize the vehicle's performance and fuel efficiency.


As inflation continues to impact various sectors, car insurance premiums are witnessing an upward trend. The increase in energy prices has led to higher costs for car repairs, prompting insurers to adjust their prices to compensate for unexpected losses. While the impact of rising premiums on consumers is a concern, understanding the factors that influence insurance costs can help policyholders make informed decisions. Utilizing comparison websites and being aware of insurance group classifications can assist drivers in finding more affordable coverage options in these challenging times. Remember, staying informed and proactive is essential in navigating the dynamic landscape of car insurance prices.



1. Oxbow Partners Report on Car Insurance Premiums, June 2023
2. Bank of England Inflation Projections, 2023-2025
3. Financial Conduct Authority (FCA) Regulations on Car Insurance Pricing
4. Association of British Insurers (ABI) Average Car Insurance Costs, Q1 2023
5. Insurance Information Institute - Factors Affecting Car Insurance Premiums
6. Vehicle Insurance Grouping System by the Motor Insurance Repair Research Centre (Thatcham)
7. Insurance Information Institute - Factors Affecting Car Insurance Premiums
8. BMW Owner's Manual and Fuel Recommendations
9. Mercedes-Benz Owner's Manual and Fuel Recommendations
10. Thatcham Research - Motor Insurance Repair Research Centre
11. Insurance Institute for Highway Safety - Vehicle Safety Ratings