How we calculate your car insurance price

We look at a variety of different factors when calculating the cost of your insurance. Some are individual to you and some are down to wider or external factors. Sometimes your car insurance price may change when you renew and you may be wondering why.

 Individual factors

  • Where you live

The number of accidents and level of vehicle crime in your area will influence insurance costs, and these can change each year.

  • The car you drive

We consider the age of the vehicle when calculating your price, as well as engine size and fuel type.

  • Where you park

Where you park your car will affect how likely it is to be damaged or stolen.

  • Mileage

The more you drive, the higher the chance you will have an accident. If this changes, your price may change too.

  • Your age

Younger drivers typically pay more for insurance because they are less experienced on the road, but costs can also increase for older customers due to slower reaction times and less frequent driving. A customer’s age also affects the predicted cost of paying a claim if, for instance they have long-term care needs as a result of an accident.

  • No Claims Discount

Each year you renew your policy without making a claim you will receive a No Claims Discount. This can be protected.

  • Any changes you make

If you make any changes to your policy either at renewal or during the previous year, such as adding or removing another driver, this will impact your price.

  • Changes in pricing

We regularly review our pricing rates for key pieces of information you give us, like the type of car you drive. If there has been a change in our expectation of the number and size of claims, we will adjust our prices accordingly. This means prices for some customers will increase whilst for others it could fall.

  • Mutual Bonus

Unlike many other insurers, we reward our loyal customers who renew their car insurance with us. We do this through Mutual Bonus, which for more than 20 years, has provided our customers with a saving on their insurance. The longer you’ve been with us the more you save.

Other factors

There are several wider, external factors which impact premiums, some of which we have little to no control over.

  • Inflation of vehicle repair and replacement costs

Costs associated with repairing or replacing your car impact your price. Due to inflation, the costs of car parts or repairs increases each year. During periods of high inflation, as we are experiencing now, these increases can be significant. In addition, the increased use of technology in headlamps, bumpers and windscreens has increased the cost to repair these parts.

  • The overall cost of claims

It’s not just an individual’s claims history that affects individual renewal prices. The basic concept of insurance is that the losses of a few are paid for by the contribution of many. If lots of people claim on their car insurance the pot must go further, which means prices increase for everyone. This includes the increasing cost of long-term care for those who experience personal injuries.

  • Weather

Storms and other spells of severe weather increase the number of car insurance claims we receive. We factor this into car insurance prices.

  • Fraud

Unfortunately, fraudulent insurance claims can affect prices for honest customers. At NFU Mutual, we have specialist counter fraud technicians in both claims and underwriting, as well as subscriptions to industry-wide databases that are used to help share data to prevent and detect fraud.

  • Taxes

Insurance Premium Tax is a tax on all general insurance premiums paid to the government. The standard rate of IPT is currently 12%.