2.6m people don’t drive as they can’t afford insurance cost

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.

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.

Meanwhile, 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.

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.”