What moves the price of car insurance
Car insurance premiums in the UK are shaped by a mix of factors that have little to do with how you drive. The cost of repairs is one of the biggest: modern cars are packed with sensors, cameras and electronics, so even a minor bump can mean an expensive replacement. The price of parts and labour, the value of the car and the time it spends off the road all feed into what insurers expect a claim to cost.
Regulation matters too. Insurance Premium Tax is added to almost every policy, and the Financial Conduct Authority's fair-value pricing rules, in force since 2022, stopped insurers charging loyal renewing customers more than new ones. The personal injury discount rate, known as the Ogden rate, sets how lump-sum compensation for life-changing injuries is calculated, and a change to it can move premiums across the whole market.
Following these stories helps you understand why a renewal quote has gone up, and when it is worth shopping around rather than letting a policy roll over.
How the Ogden rate feeds through to your premium
When someone is seriously injured in a road accident, a court may award a lump sum meant to cover a lifetime of lost earnings and care. The Ogden rate is the assumption used to calculate that figure: it reflects the return the injured person could earn by investing the money. The lower the assumed return, the larger the lump sum has to be today to provide the same future income.
Motor insurers ultimately fund a large share of these awards, so the rate is one of the biggest single influences on the cost of the most serious claims. When the rate is cut, insurers must set aside more for each catastrophic injury, and that expectation works its way into the premiums charged to ordinary drivers. When it rises, the pressure eases. The rate is reviewed periodically by the Lord Chancellor, which is why each review is closely watched across the industry.
What to do when your premium rises
A higher renewal quote is a prompt to compare, not a price you have to accept. Start three to four weeks before renewal, when quotes tend to be cheapest, and check the renewal figure against fresh quotes for the same level of cover. Look beyond the headline price at the excess, the cover for windscreens and courtesy cars, and any added extras you are paying for but will not use.
Small changes can also help: paying annually rather than monthly avoids interest, building up no-claims years protects your discount, and an accurate, realistic mileage estimate keeps the price fair. For higher-risk drivers, a telematics or black-box policy can reward careful driving with a lower price. Our wider car insurance guides set out the options in more detail.
Car insurance FAQ
The Selectra team answers your questions
Your premium reflects the cost the insurer expects across all drivers like you, not just your own record. Repair bills have risen sharply because modern cars carry sensors, cameras and electronics that are expensive to replace, and the cost of parts, labour and courtesy cars all feed in. Add vehicle theft trends, Insurance Premium Tax and any change to the Ogden rate, and prices can climb even for a careful, claim-free driver.
The Ogden rate, formally the personal injury discount rate, is used by courts to work out lump-sum compensation for people left with life-changing injuries. It assumes the injured person can invest the payout, so a lower rate means a larger lump sum is needed today. Because motor insurers fund many of these awards, a cut to the rate increases their expected costs and tends to push up premiums across the market. Our explainer on the Ogden rate walks through how it works.
Quotes are generally cheapest around three to four weeks before your renewal date, and tend to rise as the date gets closer, so it pays to shop early rather than at the last minute. Always compare the renewal price against fresh quotes elsewhere; even after the ban on loyalty penalties, the spread between insurers for identical cover can be large.
It can, particularly for younger or newer drivers who pay the highest premiums. A telematics policy prices your cover on how, when and how far you actually drive, so safe, low-mileage driving can earn a lower price than a standard policy would offer. The trade-off is that risky driving, or a lot of late-night mileage, can keep the price high or limit your cover.
More from the newsroom: market news and travel insurance news.