My car insurance costs me £150 a year extra due to 'unfair' rules - five ways to avoid the 'poverty premium'

January 30, 2023

CLARE Sandiford, 52, from Formby, Merseyside, pays around £1,000 for her car insurance because premium charges are higher than average in her postcode.

The sky-high price means she can’t afford to pay for it in one go – but paying monthly means she’s charged interest, costing her an extra £150 annually to insure her eight-year-old Nissan Leaf. 

Clare Sandiford, 52, pays £150 a year extra in car insurance rules due to 'unfair rules'


Clare Sandiford, 52, pays £150 a year extra in car insurance rules due to 'unfair rules'
Clare co-owns a small business with her husband Mark, 55


Clare co-owns a small business with her husband Mark, 55
She relies on her eight-year-old Nissan Leaf to care for her daughter, who has autism


She relies on her eight-year-old Nissan Leaf to care for her daughter, who has autism

Clare, who co-owns bespoke gift business beeoriginal.co.uk with her husband Mark, 55, relies on her car as she needs it to care for her 18-year-old daughter, who has autism.  

“Things are tough enough as it is and the extra I have to pay all adds up. It’s really frustrating,” she says.

She’s one of the 7million Brits being hit with a "poverty premium". 

If you’re on a lower income, then you’ll be hit hardest by rising inflation and soaring energy bills

Mum-of-three trapped by £8,355 high cost credit debt and poverty premium
Low-income families forced to pay a 'poverty premium' of up to £1,000 a year

It takes an average of £490 extra per year out of the pockets of low-income households, according to the Centre for Social Justice (CSJ).

Paul Maynard MP describes the poverty premium as “a vicious cycle” because it limits how far people’s income will go, further trapping them in financial difficulties.

Here, we highlight the worst poverty premium offenders – and share the experts’ advice to help you save where you can:


The poverty premium typically hits people hardest when they pay for things in instalments or as they go, instead of by direct debit, according to the CSJ.

Other issues include having to pay more for credit, being charged more for car and home insurance based on where you live, having to pay money to access cash and having to use smaller shops.

Poverty charity Turn2us found using local shops every day costs 48 per cent more than shopping in bulk at the supermarket – which is hard if you don’t have a car.

People relying on older household appliances like washing machines and tumble dryers can spend £100 or more extra on annual energy bills than those with newer goods. 

And if your washing machine packs in, it’s up to 25 times more expensive to do all your laundry at a laundrette.

While using credit or buy-now-pay-later schemes to buy new appliances can end up costing you more than double, the charity says.

TOP TIP: Order in bulk online if you can to save on groceries and check out websites like Freecycle and Facebook marketplace as people often give away fairly new appliances.


Drivers living in poorer areas tend to be charged more for car insurance because insurers see them as more of a risk. 

“If you are a low-income car insurance customer you are likely to be paying £131 more for the same thing than someone living in a better postcode,” says Carl Packman, of poverty premium campaign group Fair By Design.

Higher costs mean it’s harder to pay for your policy as a lump sum.

But paying monthly incurs interest - costing the average motorist an extra £200 per year, according to comparison site MoneySuperMarket.

It also counts as a loan and can affect your credit rating, meaning you could be charged higher rates or declined other credit.

Owners of older cars who can’t afford a newer one are also penalised.

Typically “green” discounts on car tax or parking permits are only granted to newer, more efficient cars with lower emissions. 

TOP TIP: Shop around for car insurance and try signing up for a new, free email address.

A Sun investigation previously found a driver was charged £31 more for applying using a Hotmail email address compared with a Gmail one. 


Around 4.5 million Brits use a prepayment meter for fuel bills, where money is loaded onto a key, card or app to pay for your energy as you use it.

Renters and people who have struggled with debts are most likely to have one.

Before this autumn, prepay customers were charged around £270 more per year for their fuel than those paying by the best direct debit deals.

But under the Government’s Energy Price Guarantee, from January to March 2023 prepayment meter customers will pay slightly less – 31.8p per unit for electricity and 6.4p for gas, compared to 34p and 10.3p for direct debit customers.

It’s not yet clear whether this discount will remain after April. 

That’s why Fair By Design is calling for fairer prices for prepay customers. 

“Everyone should be paying the same unit costs for energy, otherwise it’s the people who can least afford it who are paying more,” says Packman.

If you’re on a prepayment meter you are entitled to vouchers worth £400 off your bills this winter - but you have to apply for these.

Some customers have had problems – in December, MoneySavingExpert revealed up to one in three prepay customers had not yet received their vouchers for the previous two months.

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If you haven’t got yours, contact your supplier and check they have your up-to-date contact details.

TOP TIP: You can ask your supplier to switch you to a regular meter if you are not in debt, or if you are but your health is at risk, i.e. if you can’t safely access the meter or need to run medical equipment.

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