Soaring cost of car insurance in Scotland outstrips rest of UK

Many Scots are now paying more for car insurance.

Motoring experts and politicians are questioning why Scots are now paying more for car insurance than anywhere else in the UK outside of London, with one senior MSP calling it a “rip-off”.

The average quoted price of cover soared by 56.4% across Britain in the first few months of the year, according to figures, but drivers in Scotland faced a whopping annual increase of 61.9% – second only to record rises clocked up in the UK capital, where motorists experienced hikes of 64.8%.

Some parts of the UK, including Wales, the north-east and north-west of England, and Yorkshire and the Humber, actually saw quoted premiums fall slightly over the first three months of 2024, when compared to last year.

Higher car insurance premiums

The Association of British Insurers (ABI) said the higher premiums quoted in the north are mainly due to there being slightly more generous personal injury pay-outs in Scotland than elsewhere, and that this negatively affects the formula insurers use to set the rate for premiums.

Another factor that impacts the price of cover, the ABI said, is that Scotland does not have a claims portal for lower-value road-traffic-accident claims so the legal costs in defending claims are also higher here than in England and Wales.

Jonathan Fong, the ABI’s manager of general insurance policy, said: “Several factors affect premiums in Scotland differently to the rest of the UK, including the way compensation settlements for road-traffic accidents are calculated under Scots law.”

However, Scottish Labour transport spokesman, Alex Rowley, branded the situation “ridiculous” and has vowed to raise the matter with Scottish Transport Minister Fiona Hyslop.

“It is a total rip-off that Scots are paying higher motor insurance premiums than other areas of the UK and there appears to be a lack of transparency around how these figures are being arrived at,” said Rowley, the MSP for Mid Scotland and Fife. “I will be bringing this up in parliament this week, as it is nothing short of ridiculous.”

Leading road safety charity IM RoadSmart has questioned the way premiums for drivers in Scotland are calculated.

The motoring organisation pointed out that rates of serious road accidents in Scotland have fallen over the past three years and are now the lowest of the UK nations, according to the most recently available data.

RoadSmart’s director of policy and standards, Nicholas Lyes, said: “Figures show that, in 2022, there was a lower rate of killed or seriously injured on Scotland’s roads compared to the rest of Great Britain when factoring in the overall number of miles travelled.

“While postcode pricing when calculating car insurance premiums isn’t unusual, Scots will question why there might be such a difference given the recent lower rate of serious accidents.”

Scottish Conservative shadow transport minister Graham Simpson said: “Motorists in Scotland will rightfully question why they are paying more for car insurance than elsewhere in the UK.

“Despite there being fewer accidents north of the border, the average price of cover in Scotland has risen dramatically.”

‘A complex formula’

Jon McNeill, a lecturer in insurance risk at Glasgow Caledonian University, called for more transparency over the way the rates for premiums in Scotland are calculated.

“It is a complex formula and not easy for customers who buy financial products to understand,” McNeill said.

“The Scottish Government is currently reviewing this formula to ensure a better fit with economic conditions, but it is unlikely the new approach will be any less complex.

“Given the high costs of insurance motorists in Scotland are currently paying, insurers may benefit from greater transparency in explaining how they establish premiums.” In February, drivers across the UK most commonly received a quote between £500 and £749, insights firm Consumer Intelligence said.

In Scotland, however, last month drivers in the Central Belt saw even bigger increases with prices hitting £871, on average.

Glasgow and Motherwell were the most expensive areas. Average prices are now £971 and £879, respectively, following annual increases.

The hikes are partly due to a record £9.9 billion being paid out by UK insurers in 2023, the ABI explained, saying this was the highest annual figure since the organisation started collecting data in 2013, with the total up by 18% on the £8.4bn paid in 2022.

The overall number of claims settled, at 2.3 million, also rose by 10% compared with 2022. And the cost of vehicle repairs – at £6.1bn – jumped by 31% compared with 2022.

This reflected continued rising costs, with insurers reporting increases for materials and labour, the ABI said. It added that garages also faced rises in their energy costs during 2023.

“Insurers are aware of the financial challenges customers are facing and are determined to keep motor insurance as competitively priced as possible,” Fong said.

“As an industry, we’re committed to supporting customers and finding ways to help tackle the cost of providing motor insurance. Our 10-point roadmap to combat the rising costs encourages greater collaboration with government and relevant stakeholders.”

The ABI added that it had also called for a cut to the insurance premium tax, a cost that is levied on insurers but is passed onto consumers through the cost of their policies.

Scottish Liberal Democrat transport spokesperson Daniel O’Malley said: “Scottish motorists are being ripped off with exorbitant insurance prices, despite being involved in fewer serious accidents. Amid a cost-of-living crisis created by poor government in London and Edinburgh, this is even more unacceptable.

“Liberal Democrats are committed to fairness for drivers, protecting them from unfair insurance prices and punitive fuel costs.”

Experts and politicians demand answers as insurance premiums for motorists north of the border now exceed prices paid outside of London – despite the number of serious accidents on Scotland’s roads falling over the past three years and being the lowest of all UK nations. Meanwhile, an academic has called for greater transparency on policy costs from insurance firms