Summary: The UK car insurance market is changing fast. From a new Vehicle Risk Rating system to rising repair costs and the growth of telematics, 2026 will bring shifts that affect what drivers pay. Here’s what you need to know to stay informed and save money.
Car insurance costs have been falling since early 2024. According to the Association of British Insurers (ABI), the average UK premium was £551 in Q3 2025 – down £60 from the previous year. But this trend may not last.
Motor insurers paid out a record £11.7 billion in car insurance claims in 2024, driven by rising repair costs and vehicle theft.
For every £1 earned in premiums in 2026, UK motor insurers are forecast to pay out £1.07 in claims and expenses, according to EY analysis.
What’s Changing in 2026
- Premiums may rise again
After falling throughout 2025, premiums are expected to rise around 5% in 2026, adding roughly £25 to the average policy.
- Vehicle Risk Rating replaces insurance groups
The old 1-50 insurance group system is being replaced by Vehicle Risk Rating (VRR). Cars registered after August 2024 are assessed under VRR, scoring 1-99 across five areas: performance, damageability, repairability, safety, and security.
- Repair costs keep climbing
Modern cars are packed with sensors and safety tech. The ABI reports repair costs account for 64% of claims payouts. EVs are 25% more expensive to repair than petrol cars.
- Telematics insurance is growing
Black box insurance tracks driving behaviour to set premiums. Research shows 81% of UK drivers now know about telematics. For young drivers, telematics policies can offer savings over £1,000.
- Fuel duty freeze ends
The 5p fuel duty cut ends September 2026, with duty then rising annually with inflation.
- Electric car insurance remains higher
EVs cost more to insure due to expensive battery repairs. However, the gap is narrowing as repair methods improve.
- Tougher rules on uninsured drivers
New rules will stop uninsured drivers claiming property damage compensation from the Motor Insurers’ Bureau. Around 300,000 uninsured vehicles are on UK roads daily.
- Comparing quotes matters more than ever
With premiums varying widely, never auto-renew. Using a car insurance comparison service helps find the best deal.
- Young drivers still face highest costs
Drivers aged 17-24 pay around £3,350 per year according to Uswitch. Choosing a low insurance group car and considering telematics can help.
- AI is changing how insurers set prices
Insurers use AI and real-time data to assess risk. Premiums are becoming more personalised – safe drivers may benefit, while poor records cost more.
What This Means for You
The car insurance market in 2026 will reward drivers who stay informed. Compare quotes regularly, consider telematics if you’re a safe driver, and check your car’s risk rating before you buy. Small steps can lead to big savings.
With premiums potentially rising again, now is a good time to review your cover and make sure you’re getting the best value.
Sources
- Brumble – Telematics Insurance – brumble.co.uk
- ABI – Motor Insurance Premium Tracker Q3 2025: abi.org.uk
- Insurance Times – UK Motor Insurers Expected to Break Even in 2025: insurancetimes.co.uk
- RAC – Vehicle Risk Ratings System: rac.co.uk
- Uswitch – UK Car Insurance Statistics 2025: uswitch.com
- Autotrader – New Driving Laws 2026: autotrader.co.uk
