Driven Apart: The unequal impacts of high car insurance costs

Driven Apart: The unequal impacts of high car insurance costs 2.07 MB

This new report, based on nationally representative data from 6,000 UK adults, provides up-to-date evidence on the impact of high motor insurance costs. We find that the number of people priced out of the car insurance market jumped by 900,000 in the last 12 months, seeing people unable to drive as a result. This adds to the 1.7m people who have already been priced out of the market for longer than a year. This is a visible sign of increasing financial exclusion from an essential market.

But underneath this we see indicators of a hidden affordability crisis, with millions of drivers only able to cover the costs of car insurance by borrowing or cutting back on other essentials. Furthermore, we find that more than 1 in 4 (28%) drivers have reduced their level of cover in order to keep their costs down, running a risk of underinsurance and increased exposure to financial shocks if accidents occur.

It is clear that unaffordability and financial exclusion is a significant problem in this market. However, as we’ve highlighted before, certain groups are more likely to be impacted. In this report we have also analysed how insurance pricing and affordability varies across different groups. We find that some groups are paying much more than the average driver for their car insurance. Those groups paying the most are then particularly negatively impacted as a result. They are often much more likely to borrow and cut back in other areas to pay for their motor insurance, or take action to reduce the cost of their motor insurance..

The report also sets out recommendations to guide the work of the newly established Car Insurance Taskforce and the government’s commitment to improving financial inclusion. The fact that particular groups, including low-income households, people of colour and people in debt, are facing much worse outcomes in this market highlights the need to ensure that work to improve these outcomes delivers for these groups. To address this, it is essential that bold, targeted measures are actively considered by the government, including targeted bill support and consideration of the impact and overall fairness of certain risk factors like postcode pricing and the use of credit reference information.