British drivers opting for cheaper “essentials” car insurance policies may be sacrificing critical coverage, according to recent industry data. Since the introduction of the General Insurance Pricing Practice (GIPP) in 2022, the number of these budget-friendly policies has nearly tripled from eight to 22 options in the market1. While these policies offer lower premiums, experts warn they often exclude standard protections like windscreen repairs, child car seats, and personal belongings2.
The Shift to “Light” Insurance Policies
The insurance market has seen significant changes since the Financial Conduct Authority implemented GIPP in January 2022. This regulation ended the “loyalty penalty” by requiring insurers to offer identical pricing to new and existing customers1. In response, providers have introduced more “light” or “value” policies to maintain profitability while offering lower prices. Tom Banks, car insurance spokesperson for Go.Compare, notes these policies provide more choice but require careful scrutiny: “Customers have to be aware that, with this type of policy, they may be getting less cover than they would have been previously”1.
Coverage Gaps and Rising Costs
While average car insurance costs dropped 17% from £995 in Q4 2023 to £777 in Q1 2025, younger drivers (17-20) still face premiums averaging £2,258-£2,4342. The cheaper policies often exclude:
- Windscreen repairs
- Child car seat replacement
- Coverage for personal belongings
- Lost or stolen key replacement
This comes as insurers paid £2.9bn in claims in 2024, a 14% year-over-year increase driven by rising repair costs (33%) and vehicle thefts (29%)2.
Consumer Understanding and Regional Variations
Many drivers lack understanding of key insurance terms. Only 39% comprehend the difference between compulsory and voluntary excess, with just 13% of younger drivers (16-24) grasping this distinction2. Regional disparities also persist, with Londoners paying the highest premiums (£608) and facing the highest claim costs (£6,189 per claim)2. Gender differences remain despite EU rules, with men paying £833 on average compared to £684 for women2.
Future Outlook and Recommendations
The insurance landscape continues evolving with new challenges. Proposed UK tariffs on Chinese auto imports could raise repair costs for older vehicles by 20%, while inflation may push premiums up again post-20252. Experts recommend:
- Comparing quotes 3 weeks before renewal (average £77 savings)
- Considering telematics for young drivers (potential £1,137/year savings)
- Reviewing mileage-based policies (19.3 million low-mileage drivers overpay by £180 annually)
As Banks advises: “With car insurance prices having increased in recent years, customers are understandably trying to make savings where they can, but it’s important to make sure you’re still getting a policy with everything you need”1.
References
- “British drivers ‘may be getting less cover’ with popular car insurance policy impacting millions.” GB News, 2025.
- “Key Insights on UK Car Insurance (2024-2025).” Consolidated research from GB News, The Sun, Confused.com, The Guardian, Forbes Advisor, MSN, Express.co.uk, 2025.
