A woman checking a big scratch and dent in her car

The new world of car insurance claims and how it affects your premium

Prang, dent, hammer out – done. Until quite recently, that’s how many minor car claims went. But now, fenders no longer just bend, and it takes a lot more work to get cars back on the road. And a lot more money.

Published - 5 Dec 2022 | Updated - 17 May 2023

2022 saw rapid inflation which affects car repair costs and the price of your insurance too. It also means repairs are taking longer to complete, drawing out the time it takes to sort out a claim. Here are some of the reasons why it’s all coming to a head.

Where do you imagine most of your yearly car insurance premium goes? You probably think it heads straight to your insurance company’s coffers as profit. But you might be surprised to learn that, in fact, the majority of people’s car insurance premiums is used to pay for other people’s claims. And if the costs of claims are rising, then that part of your premium paying for them is going up too.

Why are claims costing more now?

We are all too aware of rocketing prices and the increased cost of living that 2022 brought us.

However, the causes of rising claim costs were brewing much longer ago. Initially, the events in question sound like convenient soundbites to bury bad news in. But when you look closer, you can easily see how the consequences snowball.

Let’s start with Brexit

After the UK left the EU in January 2020, there were issues with car part imports as everyone got used to tariffs, extra paperwork and border controls.

But along with the nuts and bolts of car repairs feeling the effects of Brexit, the number of people actually doing the repairs began to dwindle because of it.

By the end of September 2021, there were over 39 million vehicles in the UK and only 200,000 mechanics to fix them, which means there are longer waiting times when it comes to getting cars fixed. And the law of supply and demand results in the cost of mechanics’ time rising too.

When the chips are down

A whopping 35% of the cost of a new car goes on the microchips and semiconductors within it. So when carmakers cancelled all their orders in the pandemic when they halted car production, electronics manufacturers stopped making car chips and concentrated on the industries that did want them, such as producers of computers and mobile phones.

There are no stockpiles or ‘microchip mountains’, as manufacturing these days is done on a ‘just-in-time’ model, where a lorryload of components arrives at the factory gate at the exact time they are needed – that’s why ‘logistics’ is such big business.

When new cars started being made again, no chips were being manufactured for them; production slots were lost, and the carmakers went to the back of the queue. This is what lead to the value of second-hand cars rising sharply recently as there were no new cars to buy.

But as well as new cars needing chips, replacement car parts need chips too. So not only do spare parts get more expensive because of demand, they take longer to arrive, which extends the time cars are out of action after a claim. And extends the time claimants need a courtesy car for.

Global events affect things closer to home

Things are made on a global scale now and few follow a ‘raw materials in one end and a finished product at the other’ process. Cars are formed on an assembly line and the bits on the line come from around the world, such as semiconductors from China.

But the little cable harness that holds things together under the bonnet of your BMW, Audi or VW? Well, that comes from a very specialised factory in Ukraine. It’s a seemingly insignificant but essential bespoke part, and your German-engineered car will need it if it’s been in a crash. Because of the war, these parts have been stranded, and attempts to get workers and machinery across the border to Poland have been unsuccessful.

And there’s more… much more

So many things trickle into the bigger pool that is the rising cost of claims. With people stretched financially, car theft is increasing. More people are choosing electric and hybrid cars, and these are more expensive to repair.

With repairs taking more time to complete, courtesy cars are needed for longer too, which adds to the cost of a claim. This leads to increased demand and, in turn, greater costs for hire cars, with no hope of easily increasing the fleet as new cars are scarce.

And, as we pay out 99.9% of car claims, there are more claims to pay for. You can see why that chunk of premium that covers claims is having to pay for far more these days.

Tips on navigating car-owner potholes

When you renew or get a quote for car insurance, review your estimated mileage, occupation and voluntary excess, which might reduce your premium.
Up your car security by parking in a garage or well-lit space and get out those old-school steering wheel locks to deter thieves. If you’ve got a keyless-entry car, keep the fob in a signal-blocker at home to prevent keyless car theft.

Book your car in for repairs, MOTs and services early to allow for parts and mechanics to be available.
Install a dashcam and use it every journey. Any footage you have of a claim-in-progress can help speed things along and without dispute.
Call the claims line as soon as you can after exchanging details with another driver, even if you’re not intending to make a claim. If you are making a claim, here’s how.

How Saga Car Insurance can help

We know times are tough and things aren’t easy. That’s why offer a choice of three Comprehensive cover levels to suit your needs and budget.
If you ever need to claim after an accident in the UK, we’ll sort out getting your car back on the road at one of our approved repairers. They’ve all been specially chosen by us to ensure a high standard of service and provide high-quality repair work with a five-year warranty. Plus, with our Comprehensive policies you’ll also get a guaranteed courtesy car for as long as yours is with them, no matter how long it takes.

Who are Saga's car insurance policies underwritten by?

Saga’s car insurance policies, exclusively for people over 50, are unique products designed by us specifically for our customers. They are underwritten by a number of carefully selected insurers that provide high standards of quality and service.