For most of us, this will mean getting a hefty renewal bill from our existing insurer. Which for all of us, should be a trigger to run a comparison quote to see if there's a better deal out there in the wider market.
At least now, thanks to a rule change that came in on 1 April, we can see how much our current insurer wants to hike our premiums by.
Previously, there was no requirement for insurers to give information on how much more they wanted to charge this year, compared to last. Now, however, when you get your renewal notice, it will show last year's premium as well as the renewal price so you can see the scale of the increase.
This new rule comes courtesy of the Financial Conduct Authority (FCA), which regulates insurance companies. It's something we at MoneySuperMarket have been demanding for years.
The FCA has also instructed insurers to include messaging about the importance of shopping around - especially if you've been with the same provider for a number of renewals.
Again, this is in line with what we've always said: when it comes to insurance, loyalty simply does not pay, because new customers always get a firm's best prices.
Why are premiums increasing?
The FCA rule change is well timed because car insurance prices are on a steep upward curve.
Insurers are predicting increases of around £75 a year for most drivers, and up to £1,000 a year for higher-risk categories – mainly those under 25.
This is against an existing backdrop of rising premium inflation – typical prices shot up by 6% in 2016 to an average of £530.
So why this sudden additional price hike? And – crucially – what can you do to avoid it? Most customers can cut up to £275 off their renewal price, so all is not lost.*
Higher claims pay-outs
The hike follows a change to the way compensation payments for individuals who are seriously injured in road accidents are calculated.
A court decides the amount according to the victim’s potential loss of earnings and life expectancy. It then adjusts this lump sum to take account of likely returns when it is invested.
The higher the investment return, the lower the lump sum.
Recently, returns have tumbled, so the government has told insurers to increase lump sum pay-outs.
The scale of the change demanded by the government shocked insurers – but because they’ll pass on the increase via higher premiums, it could also give you a shock when you renew your policy.
The change to lump sum calculations took effect on 20 March. Premiums are now rising as insurers build up their pay-out kitties, with young high-risk drivers - those most likely to be involved in an accident which results in someone being seriously injured - facing the greatest increases.
Tax hike adds to woes
On top of this, there's another looming change that's going to increase the cost of your car insurance, and make it even more important to check you're on the most competitive deal.
From June, insurance premium tax (IPT) is increasing from 10% to 12%. This tax is levied on all car insurance policies (as well as home, pet, medical bills and pet insurance) and is passed on by insurers to their policyholders.
As it's levied as a percentage of your premium, it's vital you keep your premium as low as possible, which you can do by shopping around when that renewal notice drops through your letterbox or into your inbox.
Here's how to make sure you get the best possible price for your
car insurance. GOLDEN RULES
Never accept the renewal price offered by your existing insurer. It will almost certainly be way higher than what you could pay by shopping around – you could typically save £275*. - Start shopping around 60 days before renewal. Some insurers allow you to lock-in a quote up to 30 or even 60 days before you have to buy. Locking-in now means you won’t suffer from any increases in the pipeline - Get a fresh quote just before you renew. We’re always pushing insurers to lower their prices, so it’s worth checking before you commit to make sure you’re on the best deal.
The insurance industry is battling to change the government’s mind on this change to compensation pay-outs. You’ll probably read many more headlines on it in the coming weeks.
We’ll keep you up to speed. But whatever happens, we think car insurance renewal quotes will continue to rise, so follow the golden rules and always shop around.
*51% of customers could save up to £275.01 Consumer Intelligence, Dec 2016
Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.