Motorists are being warned to expect an increase in the cost of car insurance in 2020. A ‘perfect storm of factors’ will put pressure on premiums, according to a leading price comparison website.

It says that insurance premiums will continue to rise throughout the year, pointing to five key factors behind the higher costs. Here, we reveal the five driving forces behind the inflated premiums, along with some of the ways you can offset the cost.

Car theft is on the up

There was a three percent increase in the number of vehicle offences in the year up to June 2019. This is mainly as a result of the increase in the number of vehicle thefts (up seven percent) and incidences of theft from a vehicle (up two percent).

The keyless car theft ‘epidemic’ is another factor. More expensive cars are being stolen, increasing the average claim for a stolen car to over £8,000 in Q2 2018. This is up from £3,500 in 2013 when records began.

How personal injury compensation is calculated

The Ogden discount rate is used to determine the amount insurers should pay as compensation to people who have suffered life-changing injuries. Because the compensation is paid in a lump sum, the amount is discounted to account for interest payments.

Government changes to the rate add to the cost for insurers, which is passed on to the motorists in the form of higher premiums.

Higher cost of repairs

Cars have never been safer, but the plethora of safety assistance systems, connectivity and associated technology makes it more expensive to repair a car following an accident. Equipment such as radars, cameras and sensors tend to be located in vulnerable areas of the car, such as bumpers and grilles.

Insurers pay-out over £12 million a day to repair damaged vehicles. New technology has resulted in insurers categorising more vehicles as uneconomical to repair.

Brexit

The economic uncertainty has led to a fall in the value of the pound, increasing the cost of imported cars and replacement parts. This simply adds to the cost of vehicle repairs.

Insurance fraud

Car insurance fraud remains a big issue. Although insurers use robust fraud detection systems, there are many incidences of policyholders providing false information and making false or exaggerated claims. There are also many cases of people staging crashes to make a personal injury claim.

‘Perfect storm of factors’

Lee Griffin, CEO of GoCompare Car Insurance said: “We’re expecting this year to be another challenging one for car insurers, with a perfect storm of factors coming together to put further pressure on premiums. In addition to rising claims costs, economic and political uncertainty, insurers may face regulatory measures to change their pricing practices as the Financial Conduct Authority publishes its report and remedies on making the car insurance market work better for customers.

“There are also concerns that as the government seeks to raise revenue, the rate of insurance premium tax (IPT) charged on car insurance – which currently stands at 12 percent, could come under the spotlight again, with some experts fearing it could rise to 20 percent in line with other insurances and VAT. The rate of IPT has been unchanged since June 2017, and hopefully this year won’t be the year it is reviewed upwards again.

“Rather than just sitting back and accepting a bigger bill for their car insurance, motorists should shop around to find cover at a good price, that suits their needs.”

How to get cheaper car insurance

Regardless of where you live, what car you drive and what kind of cover you’re after, you should always shop around for a better deal. Figures released today show that letting your car insurance auto-renew will cost an average of £40. In some cases it could be as much as £125.

Here are 10 other ways to get cheaper car insurance:

1. Pay annually – paying upfront will always be cheaper than paying monthly. Consider an interest-free credit card, but make sure you repay the full amount before the 0 percent offer ends.
2. Increase your excess – choosing a higher voluntary excess will decrease the cost of your cover. But be warned: you’ll pay more in the event of a claim.
3. Limit your mileage – don’t overestimate your annual mileage, as this will cost you money. Instead, calculate how many miles you expect to cover and then add a buffer to account for unforeseen circumstances.
4. Choose the right vehicle – a 1.0-litre city car is likely to be cheaper to insure than a 2.0-litre SUV. You might find that an older vehicle is cheaper to insure, especially if it doesn’t have the costly tech mentioned above. That said, some safety systems can help to lower a premium.
5. Avoid modifications – altering the design and performance of your vehicle is likely to increase the cost of insurance. Everything from new alloy wheels to a new audio system is classed as a modification, so check with your insurance company before making changes.
6. Improve your security – adding an alarm, immobiliser and locking wheel nuts could lower your premium. As an aside, think about adding a steering lock to provide some protection against opportunistic keyless car theft criminals.
7. Choose the right policy – if you own a cheap car to drive to the railway station, do you need comprehensive cover? A third party, fire and theft policy should be cheaper.
8. Consider your add-ons – see what’s included in your policy and whether you need any add-ons.
9. Consider a telematics policy – fitting a ‘black box’ can make your car insurance cheaper, whatever your age, as long as you’re a careful driver.
10. Look out for admin fees – some companies charge a fee for making adjustments to a policy. Paying £5 extra for a policy with no admin fees might be more cost-effective than going with a company that charges £50 to make minor adjustments.

For more ways to get cheaper car insurance, visit the GoCompare website. Meanwhile, for more motoring hints and tips, check out our advice section.

Every new car in the UK is given an insurance group ranging from one to 50. Although insurers can use their own system to assess risk, the lower the insurance group, the less you’ll pay for cover. Thanks to information provided by Confused.com, we can reveal the 10 cheapest cars to insure in 2020, with the results presented in no particular order.

Volkswagen Up

Generally speaking, the following factors influence a car’s insurance group rating: performance, cost of repair, the car’s value, security and safety. A 1.0-litre city car will be far cheaper to insure than a 2.0-litre saloon. According to Confused.com, the Volkswagen Up is one of the cheapest to cover.

If you want to pay the least amount, opt for the Volkswagen Up with a 60hp 1.0-litre engine. These tend to fall into the lowest insurance group rating. Before you get any ideas, the Up GTI is a little more expensive to insure, with a group rating of 17.

Nissan Micra

Even the entry-level Nissan Micra Visia+ comes with emergency braking with pedestrian recognition, which helps to keep the cost of the insurance to a minimum. It costs £14,190, but looks too much like a driving school car without alloy wheels. Upgrading to the Accenta adds 16-inch alloys, cruise control, Apple CarPlay and Android Auto.

All versions of the Nissan Micra slot into group one when powered by the 71hp 1.0-litre petrol engine, making this an ideal car if you’re hoping to build a decent no-claims bonus. You can expect a discount of 30 percent in return for a claim-free first year of driving.

Ford Fiesta

Not only is the Ford Fiesta Britain’s most popular new car, it’s also one of the cheapest to insure. Three- and five-door versions are available, with prices starting from £16,115. You can also opt for a crossover-inspired Fiesta Active Edition or a sporty ST.

You won’t find a single Fiesta on the bottom rung of the insurance group ladder, but the now discontinued Fiesta Style slots into group two when powered by a 1.1-litre petrol engine. Opt for the same engine in what is now the entry-level Trend model and the insurance group jumps to four.

Seat Ibiza

Thanks to the way it looks and drives, the Seat Ibiza is a popular supermini for young drivers. The entry-level Ibiza SE costs £15,825 and offers 15-inch alloy wheels, a 6.5-inch touchscreen and LED daytime running lights. It’s essentially a Spanish Volkswagen Polo that looks better and is great to drive.

To pay the least amount for insurance you’ll need to opt for the Ibiza SE and the 75hp 1.0-litre petrol engine. All the other models are in a higher bracket, but if you’re after the style and aren’t too fussed about the poke, the 80hp Ibiza FR Sport slots into group five.

Skoda Citigo e iV

It’s quite a surprise to see the electric Skoda Citigo making this list, but it suggests that the overall cost of owning an EV is starting to come down. Prices start from just shy of £17,000, with up to 170 miles of range available.

Electric versions of the Skoda Citigo slot into insurance groups 11 and 12. Although you can no longer buy a new petrol version of the Citigo, finding a used example would make sense if you’re looking to minimise your costs. Some of the old 1.0-litre MPI versions fell into group one, making them inexpensive to insure.

Hyundai i10

There’s a new and exciting* Hyundai i10 on the way, but it’s unlikely to be as cheap to insure as the outgoing version (pictured). That’s what happens when you get carried away with funky LED lights and bold alloy wheel designs. It’s also more expensive, with the cheapest model coming in at £12,500, rather than £10,000. In fairness, you do get more for your money.

*It’s not that exciting.

Helpfully, Hyundai lists the insurance group ratings on its website. To pay the minimum amount for cover, avoid the 1.2-litre engine and opt for the 1.0 version. The i10 1.0 S and SE slot into group two, while other models range from four to seven. The groups of the new i10 are likely to range from six to 11.

Fiat Panda

It’s getting increasingly difficult to recommend the Fiat Panda. While it remains a fun and practical city car, it just too long in the tooth to make it a viable prospect in 2020. The zero-star Euro NCAP safety rating doesn’t help its cause, but it does have cheap insurance on its side. Well, in theory…

To achieve the lowest insurance group rating of three, you need to opt for the basic Fiat Panda Pop with a 1.2-litre engine. The Pop trim is just too miserly for most, so you’ll probably end up paying more for cover. The new mild hybrid versions should slot into group six.

Toyota Yaris Y20

Toyota is celebrating 20 years of the Yaris with a Y20 special edition. It’s packed with standard equipment, including 16-inch alloy wheels, a seven-inch media display, reversing camera and heated door mirrors. Prices start from £16,770.

Of course, the group rating is only one influence on the cost of insurance. Your age will affect how much you pay, along with where your car is parked overnight and during the day, any previous convictions and how many miles you drive in a year.

Kia Rio

If common sense is your thing, the Kia Rio is one of the best superminis you can buy. Prices start from just £13,000, all models are well-equipped, plus you benefit from Kia’s seven-year warranty. Even the flagship GT-Line S costs less than £18,500, making it a worthy alternative to the Ford Fiesta.

The Kia Rio highlights that opting for the entry-level model doesn’t always result in cheaper insurance. Although both cars are powered by the same petrol engine, the Rio 1 is group six, while the Rio 2 is group four. That’s thanks to the improved level of safety kit on the Rio 2.

Smart EQ Forfour

Rob Griffin of Confused.com said: “We’ll all be driving electric vehicles one day – and this is a great example for those wanting a four-seater option for nipping around the city.” So now you know.

All versions of the Smart EQ Forfour slot into insurance group 11. The car delivers up to 70 miles of electric range, which is great if you’re ‘nipping around the city’. If you intend to venture further afield, the electric versions of the Vauxhall Corsa or Peugeot 208 might make more sense.