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Why are motor insurance premiums so high?

In 2023, van insurance rose by 35.9% – the fastest rate for six years.1 Annual premiums for a new van insurance policy were quoted at £500 to £999 a year, making this the highest the insurance sector has seen since 2017. Private car owners saw premiums rise by 12% in the last quarter of 2023, up on average from £562 to £627.2

Although the increased cost of premiums was slightly less for younger van drivers, the overall cost of their insurance remained much higher compared to that of more experienced drivers.3

The main factor affecting the price of insurance premiums is the rising cost of replacements and repairs. According to Consumer Intelligence, the cost of repairs and replacement parts increased by around 40% from 2018 to 2022, which has impacted on both the insurance sector and the consumer.4 Labour costs have also jumped, affecting the cost of running and maintaining a vehicle.

Higher labour costs

There are several factors which contribute to the high cost of labour in the UK car industry:

  • Skilled Labor Shortage: Brexit led to a high migration rate of skilled mechanics and technicians specialising in van and premium car repairs, leading to increased demand and subsequently, higher labour costs.5
  • Training & Certification: Mechanics in the UK are often required to go through extensive training and certification processes to work on vehicles, including vans. This level of expertise can result in higher labour charges.
  • Cost of Living: The overall cost of living in the UK is relatively high compared to some other countries. Mechanics can require higher wages, which reflect in labour charges paid by the consumer.
  • Business Overheads: Repair shops and garages can have higher overhead costs linked to the higher cost of living, which can drive up the price of rent, utilities, and staff wages. In response, labour charges increase.  

Higher cost of parts

Van parts in the UK command high prices due to various factors. Firstly, the demand for vans and commercial vehicles has been steadily increasing in recent years, driven by e-commerce growth and delivery services. This surge in demand naturally escalates the need for van repairs and maintenance, ramping up the demand for van parts.

Secondly, Brexit has impacted on importation costs and supply chains, leading to higher prices for imported van components. According to the National Franchised Dealers Association (NFDA), 86% of vehicles sold in the UK are imported, so any fluctuations in exchange rates or trade agreements directly influence part prices.6

Additionally, the complexity of modern van systems and technologies has elevated the cost of replacement parts. Advanced features like electronic stability control and advanced driver assistance systems need specialized components, contributing to the overall expense.

Repair Costs: Breakdown

The cost of replacing a catalytic converter ranges from £150 to over £900, and well over £1,000 for some high-performance vehicles.7 Replacement costs can also run into hundreds of pounds for vans, with a catalytic converter for a Ford Transit MK7 van priced between £200 to £500.8 This is partly because the precious metals used to manufacture catalytic converters (platinum, palladium, and rhodium) have risen in price and partly because of the rising number of thefts of catalytic converters, leading to higher insurance claim costs.

Vehicle Clutch: How much?! On average, clutch replacement expenses range from £300 to £9009 for parts and labour, however, for luxury or high-performance vehicles, prices can soar to £1,000 or more.10 Additional expenses may apply if the flywheel needs replacing, or if other components require servicing during the clutch replacement process. Whether you use a franchise or independent garage could also affect the price you pay for replacements. For example, replacing the clutch in a Ford Transit 2.2 2013 would cost £500 to £882 in an independent garage. If you replaced at a franchise dealer, the estimate is £720 to £1,238.11 On average, a clutch can last for at least 50,000 miles, but van and courier drivers who clock up higher than average mileage might need to replace it more frequently.12

How can your insurance broker help you out?

Discussing your circumstances with us can be hugely beneficial for you. One of our clients had to wait for nine months for a Ford Transit Engine Control Unit (ECU) because of delays in sourcing Ford parts. We helped our client by negotiating a long-term hire replacement to keep them on the road.

We can access products and prices that are not available online or with other insurance brokers. You can take advantage of our exclusive products for Van Insurance and benefit from flexible payment options which suit your circumstances and budget.

Lack of vehicle supply

The lack of new vehicles has also impacted on their cost, with limited supply and high demand driving prices up. In turn, this sees an increase in the cost of claims, as replacement or new vehicles have risen in price. During the pandemic, vehicle components and parts were in short supply; so was metal and rubber used to manufacture vehicles. These factors led to a more limited supply of vans and cars, which when matched with high demand, led to price increases. With prices of new vans going through the roof, second-hand vans became more popular which drove costs up by 47% since May 2020.13

Vehicle Rental

Costs of vehicle rental have also increased. If your car or van takes weeks and sometimes months to repair because of various delays in supply chain and labour, rental charges pile up.

For years insurers have tried not to pass the cost of higher claims to consumers, but with the increased cost of living and the high cost of replacing or repairing vehicles, it’s inevitable that these factors will influence the cost of premiums for van drivers and car owners alike.  

If the cost of your premium is higher or you’d like a new quote, talk to our team of insurance experts.

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Business Choice Direct Insurance Services is a trading name of Specialist Broking Retail Limited who are authorised and regulated by the Financial Conduct Authority. Specialist Broking Retail Limited is registered in England and Wales No. 10301653.  Registered Office: Affinity House, Bindon Road, Taunton, Somerset, TA2 6AA.

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