2.6 million people don’t drive as they can’t afford car insurance cost
The number of people priced out of the car insurance market jumped by 900,000 in the last 12 months.
Charity warns of a hidden affordability crisis as almost one in five drivers are only able to pay for car insurance by borrowing or cutting back on other essentials.
With certain groups impacted more, Citizens Advice argues that the government must consider bold solutions to tackle runaway costs.
New research by Citizens Advice has revealed that 2.6 million people don’t drive because they’re unable to afford the accelerating cost of car insurance.
This includes almost 900,000 people who have had to cancel their cover in the last 12 months, in addition to 1.7m people who have already been priced out of the market for longer than a year.
For many people driving is essential for getting to work, buying groceries or travelling to healthcare appointments. But for those who had to cancel their cover in the last 12 months, 77% reported that this had a negative impact on their day-to-day life.
Citizens Advice is warning that the sharp growth in people priced out of insurance is only the tip of the iceberg. The new research reveals what the charity is calling a hidden affordability crisis with almost one in five drivers (7 million) having to borrow, cut back on essentials, or fall behind on other bills to pay their car insurance, in the last 12 months.
An unequal rise
With the price of car insurance soaring by 40% in the last two years, the charity found that the average cost of car insurance for the last 12 months was £812 - but runaway costs are hitting some harder than others.
Citizens Advice found:
On average, young people (18-34) pay twice as much for their car insurance as middle aged adults (35-54) and 56% of young people pay monthly for their car insurance which tends to be more expensive than paying annually.
One in four (25%) people receiving benefits have fallen behind on their car insurance payments in the last 12 months, compared to just over 1 in 10 (11%) of drivers overall. They are also almost twice as likely to have had to borrow, cut back on essentials, or fall behind on other bills to pay their car insurance in the last 12 months – 33% versus 18% for all drivers.
The average cost of car insurance is £546 higher for people of colour compared to white drivers. Separate to the charity’s previous work on the ‘ethnicity penalty’, which found that people of colour are facing disproportionately high car insurance premiums, this latest research found this group is almost twice as likely to borrow (16% versus 9%) to pay for their insurance compared to white drivers in the last year.
The charity is also concerned that soaring premiums could lead some people to break the law by cancelling their insurance but continuing to drive uninsured. This has wider financial impacts for those with insurance should they be involved in an accident with an uninsured driver.
“I want to go out with my car, but my car costs are stopping me from going out.” - Amy’s story
Amy, 21, has been driving for almost a year. She works part-time as an office administrator and car insurance is her biggest bill. For third party, fire and theft cover it costs Amy £100 a month; which is more than a quarter of her income. With no train station in her town, she relies on her car to get to work, do her shopping and see her family but she must budget carefully to keep it on the road.
“£100 a month might not sound like a lot to a lot of people but I have to budget quite a lot in order to afford my car. It’s probably the most expensive thing I have to pay for.
“When you’ve got rent and bills to pay as well, it adds up. I pay my insurance monthly which is a bit more expensive but I could never afford to do it annually.
“I can’t really afford to buy luxuries like going for days out, because it takes such a big part of my pay. I want to go out with my car, but my car costs are stopping me from going out.”
Tackling the gear shift of rising costs
Citizens Advice says that steps to curb the increase in car insurance costs are needed and welcomes a new cross-government taskforce created to address affordability for consumers.
But the charity is warning that a range of bold solutions will be needed to tackle runaway costs in the market. This includes challenging insurers to lift the bonnet on factors that impact costs like postcodes and credit scores which drive big differences in prices paid by different groups.
With some facing greater affordability challenges in this market, Citizens Advice also argues the government should explore opportunities for targeted support to help those most at risk.
Dame Clare Moriarty, Chief Executive of Citizens Advice, said:
“Car insurance is essential for so many people, whether the car is needed to commute to work, take children to school, or travelling to healthcare appointments.
“But a shocking number of people are being excluded from this market. We’re concerned a hidden affordability crisis is affecting millions of people.
“We welcome commitment by the government to tackle this issue but it’s crucial that nothing is left off the table. Bold action must be taken to tackle skyrocketing costs, including targeted support for those struggling most. We need a market that works for everyone, leaving unaffordable insurance premiums behind once and for all.”
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Notes to editors:
A full version of Citizens Advice’s report ‘Driven Apart: the unequal impacts of high car insurance costs’ can be read here.
Evidence on car insurance affordability comes from a representative survey of over 6,000 UK adults. Walnut Unlimited conducted an online poll of 6,000 adults in the UK conducted for Citizens Advice. Fieldwork was conducted between 30th September – 15th October 2024. The figures have been weighted and are representative of all UK adults (18+).
Statistics have been scaled up to the UK adult population. The UK population figure is based on ONS Census data from 2023. The total adult population for the UK was calculated as 54,196,443 based on this dataset. This was then used as a basis to extrapolate the Walnut polling.
The number of people priced out of car insurance has jumped by more than 50% in the last 12 months. 900,000 new people have had to cancel their cover in the last 12 months in addition to the 1.7m people who have already been priced out of the market for longer than a year.
When asked if people had to take action to make payments more affordable, Citizens Advice found that more than 10 million drivers have had to take action to reduce the cost of their motor insurance in the last 12 months. This includes reducing their cover of insurance by accepting a higher excess or moving from fully comprehensive cover to third party only which could see people hit with shock costs if they need to claim.
The car insurance costs in this release - including averages and references to specific demographic groups - are based on polling data from 6,000 consumers. From this nationally representative sample, the average annual price for car insurance was £812. This figure represents the average cost across all types of car insurance, such as comprehensive cover, third party, fire and theft and is averaged between paying annually or monthly. This figure is slightly higher to the average motor insurance premium of £612 cited by the Association of British Insurers (ABI) due to different methodologies. The ABI highlighted that the price of car insurance increased by 40% between Q3 2022 and Q3 2024. Further information here.
In this report we show the differences in prices paid for car insurance for people of colour and white people. This is based on polling data for a representative sample of UK adults, in contrast to our earlier report which focused on people in debt. The figure used in this release should not be used comparatively to our previous research on the ‘ethnicity penalty’.
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