What's happening to car insurance premiums?

The average cost of car insurance dropped 5% in the first three months of this year, the latest data from the Association of British Insurers (ABI) shows.

Quarterly figures show the price of a policy in January to March 2025 was £589. That's down from £621 recorded in the final quarter of last year.

Read on to find out more about the current cost of car insurance and for tips on how to pay less.

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What's happening to car insurance prices?

The ABI's latest figures show the average car insurance premium was £589 in the first three months of 2025. That's down 5% from £621 in the previous quarter and 7% cheaper than at the beginning of last year, when the average cost of a 12-month policy hit £635. 

However, premiums are still much more expensive now than a couple of years ago. The average cost of an annual policy was £478 in January to March 2023. That's 23% less than the first quarter of 2025.

Published every three months, the ABI's data gives the most accurate picture of the market as it's based on actual prices paid by drivers (as opposed to quotes), and covers both new customers and those renewing existing policies.

The chart shows how the average cost of a car insurance premium has changed since January 2022:

• Find out more: best car insurance companies

Some drivers pay well above the average

Customers who choose to pay monthly are likely to be paying even higher prices, thanks to the sky-high interest rates charged by insurers. Which? has been actively campaigning for a fairer deal for pay-monthly customers since the beginning of 2024. 

Last year we ran three surveys of insurance firms to learn about their charges for paying monthly. These have revealed annual percentage rates (APRs), which we think are unjustifiably high – and which effectively penalise customers who can't afford to pay for their insurance in one go – potentially to the tune of hundreds of pounds. 

The Financial Conduct Authority has previously voiced misgivings about whether premium finance, which is necessary to many customers, is offering policyholders 'good outcomes'. In October 2024, it launched a study to investigate competition in the market. 

Our petition to end the insurance 'rip-off' has so far been signed by 170,000 people and Which? presented it to the FCA, calling on the regulator to take urgent action. You can find out all about it and sign our petition yourself on our campaign page. 

Why is the cost of car insurance still so high?

Record claims costs are blamed for the high price customers are still paying to insure their vehicle.

The ABI's latest figures show insurers paid out £3.2bn in motor insurance claims in the first three months of 2025. That's the highest quarterly payout since records began in 2013. 

An increase in repair costs is putting particular pressure on providers. That figure rose from 1.9bn in the final quarter of last year to £2.1bn at the beginning of 2025. Pricier replacement parts, higher labour costs, inflation, and a shortage of skilled technicians all contributed to making the job of fixing a car more expensive.

Theft also played a role, as the average claim for theft of and from a vehicle stood at £11,300.  

What impacts premium prices?

Age and driving experience all have an impact on premium prices. 

The younger you are, the higher the cost of insuring a vehicle. That's because drivers who haven't been on the road for long are considered more likely to be involved in an accident, so providers up their premiums to account for that increased risk. 

The price of insuring your car gradually decreases as you get older and spend more time of the road. 

You'd expect to see cover jump again once you reach retirement age and insurers take into account increased age-related risks. But when we looked at GoCompare data from the first three months of 2025, we found premiums don't increase dramatically until a driver is well into their 80s.

Go Compare's latest report shows that mileage impacts the cost of insurance too. Those driving up to 6,000 miles pay an average of £444 for their premiums compared to £488 paid by those driving up to 10,000 miles.

How much could you save by switching?

You can potentially make big savings by shopping around for a better deal. 

A good place to start is by checking out price comparison sites, which allow you to view multiple car insurance quotes at a glance. The main ones for insurance are Compare the Market, Confused.com, GoCompare and MoneySuperMarket. 

But remember, not all insurers are on price comparison websites: Which? Recommended motor insurance providers Direct Line and NFU Mutual are examples of this.

Other ways to keep costs down

Here are a few simple ways you can reduce the cost of car insurance:

• Go annual Paying for a whole year in one go instead of monthly could save you hundreds of pounds.

• Renew early You'll often get a cheaper price if you renew your cover a few weeks (rather than a few days) in advance of the policy's end date.

• Keep mileage down Try to limit the miles you clock up over the year to avoid being hit with a higher premium.

• Tweak your job title Your occupation can also impact your premium. One trick to get around this – without lying – is to try and tweak your job title. For example, instead of 'barber', try saying 'hairdresser' or 'hair stylist'.

• Haggle If you don't want to switch to another insurer, you might be able to get the price down by haggling.  

Find out more: how to find cheap car insurance

This story is regularly updated with the latest figures from ABI and comparison sites, including Confused and Compare the Market.