SimplyQuoteInsightsTaxi InsuranceWhy have taxi insurance premiums gone up in the UK?

Why have taxi insurance premiums gone up in the UK?

Author image Chris Richards
7 mins

The ongoing cost of living crisis, inflation, and increased repair costs have led to higher car insurance premiums in the UK. These factors have affected all motorists across the board, from the average Joe to taxi drivers and everyone in between.

Let’s explore the nitty gritty details in SimplyQuote’s latest guide.

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Why have taxi insurance premiums gone up in the UK? What has caused increased insurance premiums? How can taxi drivers keep insurance costs down? How can taxi drivers keep operational costs down? Final thoughts Frequently asked questions

What has caused increased insurance premiums?

Several things have caused rising costs in the insurance industry for taxi drivers:

Cost of living crisis and inflation

According to the Association of British Insurers (ABI), car insurance increased by 25% between 2022 and 2023, with Q4 rising by 12% alone. The average price of private car insurance went from £562 to £627 between October and December 2023, with the average premium rising by 34% compared to Q4 2022.

While the cost of living has dropped twice in 2024, it’s expected to rise again leading up to winter. The average household is expected to see a further 10% increase in gas and electric bills this autumn (2024). This economic inflation has a knock-on effect for all UK residents and business owners, with insurance increases being one of them.

Customers pay more now than they ever have in recent years. While rising energy costs and inflation are partly to blame, other contributing factors have hiked car and taxi insurance in Great Britain.

Increased repair costs and vehicle shortages

Repair costs

According to the same Association of British Insurers report, vehicle repair costs were found to be the single largest factor behind rising insurance premiums. Costs jumped by 32% in Q3 (2023) from £1.6 billion to £2.54 billion, reflecting a mix of increased energy and labour costs.

Additionally, more sophisticated vehicles, like electric cars, generally require specialised labourers and parts, with reports of these vehicles being 25% more expensive to repair (and taking 14% longer to fix) compared to their petrol/diesel counterparts.

Vehicle shortages

Businesses were severely affected by 2020’s pandemic which caused a shortage of supplies across many industries. Semiconductor chips (which can make up a third of vehicle costs) were heavily impacted, causing a backlog in private and commercial vehicle deliveries.

This supply and demand has hiked up the market value of second-hand vehicles, including courtesy cars provided by insurers. This explains why insurance prices have increased, as insurers cover the cost of replacement cars while yours is in for repairs.

Higher claim frequency

On top of rising energy costs and vehicle shortages, insurance companies have seen a drastic increase in insurance claims.

These seem to outweigh the amount of cash they bring in from paid premiums. It’s estimated that for every £1 British insurers receive in premiums, they spend £1.11-£1.14 in operational costs and claim payouts. Many insurance companies have had to increase their premiums to avoid running at a loss.

Fortunately, there are ways taxi and private hire drivers can lower their insurance prices.

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How can taxi drivers keep insurance costs down?

A taxi driver can reduce their motor insurance costs in many ways, including comparing quotes, opting for cheaper vehicles, and maintaining a clean driving record.

Let’s take a closer look at how you can lower insurance costs:

Compare insurance quotes

Compare taxi insurance quotes from multiple UK insurers to ensure you get the best deal suited to your business operations and budget. Look for policies that align with your working style and only choose the optional extras you need.

Pro tip: Use SimplyQuote’s 100% free, online comparison tool to compare public and private hire insurance from top UK insurers.

Opt for vehicles in a lower insurance group

Opting for a cheaper vehicle can significantly reduce your insurance costs as expensive models are more costly to insure. This also keeps running and vehicle repair costs down.

Furthermore, keep vehicle modifications to a minimum as the more bells and whistles you have, the higher your insurance will be.

Bonus read: Best Cars For Private Hire Taxis

Pay annually

Consider annual insurance payments instead of monthly instalments. This will eliminate monthly interest rates and lower prices.

Build up your no-claims discount

Add no claims discount (NCD) protection to your policy, so if you’re involved in an accident, you won’t lose your discount even if you are at fault.

Consider telematics

Black box insurance is an additional policy that bases premiums on driving history and driver behaviour. Telematic devices monitor how, when and where you drive and send the collected data to insurers to calculate your premiums. In short, safer drivers have lower premiums.

Install dash cams

Dash cams provide unbiased evidence in the event of an accident and help deter criminal activity. Insurance providers favour these devices as they provide concrete evidence when it comes to making a claim and can clear your name if you are wrongfully accused.

Bonus read: Why Do Private Hire Drivers Need A Dash Cam In The UK?

Secure taxi vehicles

Whether you drive hackney carriages (e.g. black cabs) or private hire vehicles, keeping them secure when not in use can help lower your insurance costs. Parking your vehicle/s in locked garages, secured parking lots or private driveways can significantly reduce the likelihood of vandalism, burglary, or theft.

Additionally, consider:

  • CCTV cameras
  • Dash cams
  • Alarm systems
  • Immobilisers
  • Steering wheel locks

Maintain a clean driving record

Maintaining a clean driving record, free from licence points and convictions, will drastically lower your insurance costs as insurers consider you a low-risk driver.

This means complying with road rules at all times, including sticking to the speed limit, avoiding bus lanes and keeping a safe following distance when behind the wheel.

Attending an advanced driving course can also be beneficial.

Bonus read: How To Be A Good Taxi Driver

How can taxi drivers keep operational costs down?

To compensate for rising insurance costs, taxi drivers often look at other areas of their business to find ways to reduce costs.

Here are a few suggestions:

  • Invest in technology: Consider sat-navs or navigation apps to find the most economical route. This helps keep fuel costs down and reduces wear and tear on your vehicle caused by unnecessary driving. You might be interested in: Best Taxi Driver Apps.
  • Choose fuel-efficient vehicles: Consider modern cars with good fuel economy to help reduce overall running costs. Newer vehicles tend to give less trouble and have a better fuel-to-mile ratio.
  • Regular vehicle maintenance: While vehicle repairs and maintenance can be pricey, it’s best to stay on top of minor problems before they become major issues that cost a lot more in the long run. Service your vehicle at least once a year to ensure it remains in tip-top shape.
  • Reduce ‘dead miles’: Excessive driving uses more fuel and causes more wear and tear on vehicles. Strategically park your taxis in high-demand areas when searching for the next fare to limit the number of miles you drive between trips.

Bonus reads:

Final thoughts

Taxi insurance prices have risen due to inflation, the cost of living crisis, and vehicle manufacturing delays. These factors have had a knock-on effect on the entire United Kingdom. From rising energy bills to insurance premiums, taxi drivers are paying more now than they ever have in recent years.

Luckily, by comparing insurance quotes, maintaining a clean driving record and opting for fuel-efficient vehicles, you can lower your operational expenses to compensate for higher insurance prices.

Remember to use SimplyQuote’s free online comparison tool to find the best insurance rates in the UK.

Frequently Asked Questions

What’s the lowest level of taxi insurance drivers can get in the UK?

Third-party-only insurance is the lowest insurance cover for taxi drivers in the UK. It protects drivers against third-party claims should they injure someone while on duty. However, it won’t cover your vehicle repair or personal injury costs.

Is taxi insurance a legal requirement in the UK?

Yes, all UK motorists are required to have the appropriate motor insurance based on the type of vehicle they drive. Taxi drivers can either opt for public hire or private hire insurance in the UK.

What does taxi insurance cover?

What taxi insurance covers depends on the type of policy you have:

  • Third-party only (TPO) – only covers third-party persons in the event of an accident.
  • Third-party, fire and theft (TPFT) – includes TPO and will pay out if your vehicle is stolen or damaged by fire.
  • Fully comprehensive – includes TPFT and pays out for vehicle repairs, personal injury costs and legal fees.