Factors That Affect Your Premium: Car Insurance Rates Explained

Is the rise in insurance costs in Ireland causing you financial strain? With premiums increasing, it's more important than ever to understand what drives these costs.

As a leading insurance provider, AIG recognises the challenges faced by Irish drivers due to these escalating costs. That's why we've created this guide to help you understand the factors that influence your rates and discover potential ways to save in this volatile market landscape.

Why Are Car Insurance Premiums Increasing?

There are many factors at play when it comes to the nature and cost of car insurance premiums. 

As it concerns Ireland’s continually rising rates, one often-cited reason is the fallout of the Covid-19 pandemic, with road traffic now very much back to its busiest, in contrast to the considerably less packed state of play between 2020 and 2022. 

Overall inflation is another key cause, as are specific methods designed to tackle insurance-based reform in Ireland, from independent review boards to An Garda Síochána-fronted fraud units.

On a more individual level, your premium likely says a lot about you, specifically. Your own driving history and experience on the road, the type of car you drive, your age, precisely where in the country you live, and your annual mileage, to name a handful of influential factors. 

What Factors Affect Car Insurance Rates?

Let’s look at those areas one by one and see how best you can go about knocking down the related financial strain. 

Driving History and Experience

Car insurance premiums are often weighted towards the experience and safety record of the driver. A younger or first-time driver is more likely to receive a higher premium due to the lack of tangible history on the road to point to. 

In contrast, a driver with many years of experience behind the wheel and a notable lack of penalty points on their record should expect to be subject to a lower premium. The number of years you have held a valid driving licence can also influence the premium, as it points to physical evidence of experience. 

Driver Age

In the insurance industry, personal details matter. Various aspects of your individual profile and driving habits are carefully evaluated.

Age plays a significant role. For instance, teenagers typically face the highest premiums. According to statistics released by the Road Safety Authority (RSA) in July 2024, young people continue to be disproportionately represented in road fatalities, 27% of deaths on Irish roads up to that point were made up of people aged 25 or younger.

Driver Occupation

Your occupation will also be closely examined, especially in relation to how integral your car is to your daily work routine. The frequency of your commute and the risk level associated with your occupation can significantly influence your insurance premium. Do you frequently use your car for work? Is your line of work linked with a higher or lower likelihood of accidents?

Driving Behaviour

As you might expect, how you behave behind the wheel is of major concern. Are you a responsible driver who avoids distraction and keeps their eyes on the road at all times? Do you have penalty points on your record? Have you broken the law? Have you experienced car accidents before? Have you made previous claims? These questions, and their answers, will be taken into account. 

Tip: Check out our essential guide on What to Do If You're Involved in a Car Accident

Your Annual Mileage

Your annual mileage may also come into play. The logic is simple: the more you drive, the higher the likelihood of being involved in an accident or facing an emergency situation.

In particular, cars primarily used for business or commercial purposes tend to accumulate significant mileage due to long commutes or frequent trips. These vehicles may attract higher premiums.

It's important to provide accurate information about your annual mileage when applying for car insurance. Underestimating your mileage could invalidate your policy, while overestimating could result in unnecessarily high premium

Tip: Looking for the best commuter vehicle, check out our Top Cars for Commuters guide.

Vehicle Storage and Parking Location

Where you keep and park your vehicle is also a consideration. If stored in an area that suffers high crime rates and recorded instances of car theft, this is likely to lead to a higher insurance premium. How busy the area is in terms of traffic will also be looked at, as will whether the car is kept on an open street or in a private garage. 

Vehicle Choice and Possible Modification

They say a car says a lot about the person who drives it, from how it looks to how it runs.  Your choice of vehicle is also likely to be thoroughly assessed by your insurance provider. 

A car deemed to be a ‘luxury’ model, for instance - sports cars, expensive models, and so forth - will attract a considerably higher price for repair and replacement, hence a higher insurance premium. These cars may also be associated with high speeds, thus adding to the potential risk factors. 

Custom modifications such as engine upgrades or cosmetic enhancements can also raise the premium due to increasing the market value of the vehicle, and arguably marking the car as a more valuable target for theft. 

It’s not just brand new flashy vehicles, though - older cars can be subject to higher premiums due to wear and tear causing degradation over time, difficulty in sourcing replacement parts, and a lack of modern technology and safety features. 

Technology and Safety Features

As noted, older cars may pose problems due to a lack of onboard modern technology. To put it simply, the better-equipped your vehicle is for overall protection, the lower the potential risks, the lower the possible premium. 

On a basic level, a car with a security system and functioning alarm is always going to be easier to insure than one without. Technology has evolved over time, of course, and presents drivers with multiple high-tech options to outfit their car with. 

Dash-cams have become commonplace, with captured footage from the devices often requested by Gardaí in the event of a collision. They will also prove highly useful should you need to make an insurance claim that video evidence can accompany.

Other modern-day safety features such as advanced driver assistance systems and adaptive headlights only increase the overall safety of your vehicle, thus hopefully decreasing your premium in tandem. 

Telematics or ‘Black Box’ Insurance

Telematics, or ‘black box’ insurance, meanwhile, uses a small device installed in your vehicle to monitor driving behaviour in real-time, capturing how, when, and where you drive. This type of insurance analyses driving patterns such as speed, acceleration, braking, and time of day. 

AIG’s innovative telematics system, BoxClever, is designed to offer a nuanced and fair approach to car insurance, tailoring your insurance premium uniquely to your habits. 

Policy and Coverage Option

With different types of insurance coverage available, the resulting premium is going to be affected. A comprehensive package with numerous features will naturally cost more than a lower-tier option. The same goes for optional extras, should you wish to add them on to your existing policy. 

Tip: Understand the difference between Third Party and Comprehensive car insurance - check it out!

Depending on your preference or circumstances, paying annually is likely to reduce your overall premium. Voluntary excess, meanwhile, determines the amount of money you will need to pay should you make a claim. Prices tend to vary, though a higher excess will reduce your overall premium. Be aware, though, that should you indeed have to make a claim, the related costs are increased. 

How To Reduce Your Car Insurance​

Despite the facts, the figures, the headlines, the reports, and the ever-intensifying feeling that insurance is a constantly sky-rocketing thing, there is an undeniable ‘common sense’ aspect to how to keep your premium down. 

Some factors are naturally beyond your control, but your approach to driving from the moment you select the type of vehicle you want to drive to the instant you get behind the wheel to everything that happens from that point on, your decision-making influences just about every cost imaginable. 

At AIG, we aim to help you make informed decisions, ensuring you can go about your day knowing that we're here to support you in case of any mishap. Get an online car insurance quote in minutes and see what you can save with AIG.