Insuring a car costs Britons an average of £436 per a year, or a staggering £28,122 over their driving lifetimes. And that’s if you’re getting average car insurance premiums. Drive an expensive or eye-catching car, make previous claims or have motoring convictions, rack up a high annual mileage, or have a dangerous occupation and you could be looking at premiums three or even four times the average.

Why is car insurance so expensive, and why specifically is your policy so expensive? To understand that we have to take a closer look at how insurers calculate premiums and what factors impact their costs.

Why is car insurance expensive in general?

Car insurance is expensive because the cost of claims is high; the average is now a record £3,106. It’s expensive to repair a damaged vehicle, to replace a stolen car, to compensate the drivers and passengers of other vehicles injured in accidents you caused. In 2017, the amount paid on motor claims was £8.1 billion.

A number of specific factors have been driving up insurance costs in recent years:

• uninsured drivers: Despite strict regulation about the best car insurance, an estimated one million motorists in the UK are driving without it. Reportedly, 27,000 people get into collisions with uninsured or untraceable drivers every year and the costs of their vehicle repairs and personal injury payments are effectively covered by drivers who do have insurance. It’s been calculated that the average driver pays an extra £30 a year on their insurance premiums to compensate for uninsured drivers.
• fraud: According to the Association of British Insurers (ABI), in 2016 the insurance industry detected 125,000 fraudulent claims worth a total of £1.3 billion. There were obviously many thousands more spurious claims that the industry wasn’t able to detect, despite new powers insurance companies have to challenge suspicious claims, and payouts to scammers drive up your premiums. Many of these fraudulent claims are for whiplash, an injury that’s impossible to disprove because it doesn’t show up on x-rays. Whiplash claims cost the insurance industry £2 billion a year, adding £90 to every driver’s annual premiums.
• Ogden discount rate: “The what?” you ask. The Ogden discount rate is part of the calculus used to determine the payouts for life changing injuries and it changed in 2017 from 2.5% to -0.75%, increasing the amount of compensation and thus insurance premiums.
• insurance premium tax: You won’t pay VAT on insurance. Instead you pay the insurance premiums tax (IPT), set by the government. It’s been rising recently, doubling from 6% in 2011 to 12% as of June 2017.

Why is my car insurance expensive?

Enough about the generalities. Why are your insurance premiums so high in particular? It could be a number of reasons.

• your age: You’ll pay much steeper premiums if you’re under 25, as insurers assume—and the data confirms—that young, inexperienced drivers are more likely to be in accidents.
• your vehicle: Drive an attention-catching, expensive, or high-performance vehicle and insurers think it’s more likely to be stolen or involved in an accident and will push up your premiums accordingly.
• your postcode: Live in an area with a high rate of auto theft and your premiums will reflect this.
• your occupation: If you have a dangerous occupation or one that involves lots of driving, you’ll pay more than someone who never drives for work or is seen as having a safer job.
• your claims history: If you’ve made claims on your insurance over the last tree or five years, you’ll have to disclose them to any potential insurer and these will drive up your costs, as insurers assume you’re either a careless driver and vehicle owner—or just unlucky.
• your motoring convictions: If the police and legal system has decided you’re a dangerous driver, the insurance industry will be making notes. In extreme cases, you might not even be able to qualify for coverage from most insurers and may have to pay steep rates for the lower coverage of third party or third party, fire, and theft policies.
• where you park your vehicle: If you park your car exclusively on the street because you don’t have access to off-street parking or a garage, your insurance premiums will be higher to reflect the greatest risk of theft, weather damage, or your useless neighbour clipping your mirror.
• you let your policy auto renew: Car insurance policies often roll over each year, but the premiums generally increase. If you’re not vigilant, you could end up locked into 12 months of the same coverage at a steeper rate.
• you didn’t compare car insurance quotes: A car insurance comparison site can survey the entire market in seconds, fetching you the cheapest quotes for the best coverage and potentially saving you hundreds a year.