Penalty points and their impact on car insurance costs

Over the past three years, car insurance premiums in the UK have surged by 82%, a rate four times higher than the increase seen in Europe. This has caused concern among drivers, who are now paying closer attention to factors that can influence their insurance costs.

One of the most significant factors is the accumulation of penalty points on a driver's license. These points, assigned for traffic violations, indicate a higher risk to insurers, leading to increased insurance premiums and, in some cases, the potential loss of your license. 

Jonathan Such, Head of Sales at First Response Finance, a leading provider of car, van, and motorbike finance, has shed light on the relationship between penalty points and car insurance costs. His insights aim to help drivers better manage their expenses.

What are penalty points? 

Penalty points, or driving endorsements, are added to your record when you're convicted of a motoring offense, such as speeding or dangerous driving. The severity of the offense determines how many points you receive. For example, a minor speeding violation may add three points, while a serious offence such as drink driving can result in up to 11 points. 

According to the Driver and Vehicle Licencing Agency (DVLA), as of September 2023, over 2.7 million drivers in the UK have at least three points on their licences, with the Halifax (HF) postcode having the highest concentration of drivers with points. 

Drivers should be cautious, as accumulating 12 points within a certain period could lead to losing your license. Even if you don’t hit the limit, having penalty points will likely raise your insurance costs.

How do penalty points affect your insurance?

Penalty points will impact your car insurance premiums, with more points leading to higher costs. Not only are you likely to pay more for coverage, but some insurers may even refuse to cover you. 

Jonathan Such said: "Insurers assess risk partly based on the number of penalty points on your license. Drivers with points are often seen as more likely to be involved in accidents and make claims, resulting in higher premiums. 

"The more penalty points you have and the more recent your offenses, the higher your insurance quote is likely to be. This has a knock-on effect on your other expenses as well. For example, when applying for car financing, lenders often consider your overall financial situation, including insurance costs. High insurance premiums might signal financial risk to lenders, potentially affecting the terms of your car loan or even your ability to secure financing."

Insurers calculate premiums differently, so costs can vary between providers. However, general guidelines can help estimate the impact. For instance, a conviction code SP30, such as speeding, might raise your insurance by 34% with one to three points, and by about 58% with four to six points. Violations with a conviction code CU80, such as using a mobile phone while driving, could lead to a premium increase of up to 174% if you have more than seven points. 

It's essential to be honest about your driving history with your insurer, as failing to declare penalty points can be considered insurance fraud, leading to serious legal consequences.

How long do penalty points stay for? 

Penalty points don't just impact your insurance premiums in the short term; they can affect your costs for years. Depending on the nature of the offense, points can remain on your driving record for anywhere from four to 11 years. During this time, they will be visible to insurers and employers, potentially affecting your insurance rates and job prospects. If you're under 18, only your employer can see your points. 

You can check your penalty points by visiting the government website. You'll need your driving license and national insurance numbers. Points will remain on your record until they expire, and if they aren't automatically removed upon expiration, you may need to contact the DVLA.

Mitigating the impact of penalty points 

While penalty points can have a considerable effect on your car insurance costs, there are steps you can take to mitigate the impact: 

• Drive safely - the most effective way to avoid penalty points is to follow traffic laws and drive safely. By doing so, you reduce the risk of violations and subsequent insurance hikes.
• Shop around - if your insurance premium increases due to penalty points, it's worth shopping around for a better deal. Some insurers may be more lenient or offer specialised policies for drivers with points on their record.
• Take a defensive driving course - in some jurisdictions, completing a defensive driving course can help reduce the number of penalty points on your license or lower your insurance premium. Check with your local traffic authority and insurance provider to see if this option is available.
• Wait it out - over time, penalty points will expire, and your driving record will gradually improve. While it may take a few years, being patient and maintaining a clean record in the interim will eventually lead to lower insurance costs.

Penalty points are more than just a mark on your driving record - they can have a lasting financial impact by increasing the cost of your car insurance. 

Such said: "Beyond the obvious safety concerns, drivers should hopefully be incentivised by the financial impact to take care when on the road or risk being charged a significantly more for cover."

Penalty points can have a significant financial impact beyond the immediate cost of fines. They can increase the cost of your insurance and impact your budget and car financing affordability. 

Jonathan Such emphasises: "The rising cost of car insurance should encourage drivers to be more responsible drivers. By understanding the consequences of penalty points and taking steps to avoid them, drivers can protect both their finances and their safety on the road."