The good news is that last year saw premiums fall to their lowest level for six years according to the ABI’s latest Motor Insurance Premium Tracker.
The not so good news is that they may be on their way back up.
The latest Tracker survey, the only one that looks at the price consumers pay for their cover, rather than the price they are quoted, shows that in 2021 the average price paid for comprehensive motor insurance was £434. This fell by 7% on 2020 to its lowest level since 2015. However, in quarter 4, 2021 the average premium paid rose by £11 on the previous quarter to £440. Despite this rise, the average premium was 3% lower than the same quarter of 2020.
The rise in the average motor insurance premium paid in the last quarter 2021 highlights the continued cost pressures on insurers could be starting to filter through into the cost of cover.
Between 2015 and 2020, the average amount paid for damage to policyholders’ vehicles increased by 59% and the average paid to third parties for damage to their vehicles rose by 32%. In addition, supply chain issues that are impacting on other sectors are causing some delays in accessing some replacement parts and with road traffic returning to pre-lockdown levels, claims are expected to rise.
The introduction of rule changes by the Financial Conduct Authority (FCA) to the pricing of motor and home insurance could, as the FCA say, lead to some consumers paying higher prices if they currently benefit from significant new business discounts. This change came into effect on 1 January.
Laura Hughes, the ABI’s Manager, General Insurance, said: “While we expect the motor insurance market to remain highly competitive in 2022, rising costs for parts, repairs and other supplies and services will continue to put pressure on premiums for motor insurance for both new and existing customers.
“Insurers appreciate that many households are facing a cost-of-living squeeze with rising household bills as costs rise in other areas of the economy, and they will be doing all they can to ensure competitively priced motor insurance, in the face of the variety of cost pressures faced.
“While the FCA pricing rule changes may well lead to fewer introductory discounts, it should still pay to shop around for the best deal for your needs.”
