Insurance companies are facing increasing cost pressures which have pushed the price of motor insurance to levels not seen before. The current average premium is 21% higher compared to Quarter 2 in 2022 and is at its highest since the Association of British Insurers (ABI) started collecting this data back in 2012.
The ABI’s latest Motor Insurance Premium Tracker analysis of 28 million motor insurance policies gives the most accurate picture of what UK motorists are actually paying for their cover. Based on premium payments, not quotations, it reflects what is actually happening in the market.
In June, analysis from international consultants EY said that “the UK motor insurance market experienced its worst performing year in a decade in 2022’. Their report highlighted that for every £1 motor insurers received in premiums, they paid out £1.10 in claims and operating costs.
ABI’s latest tracker shows that in the second quarter of this year:
- The average premium paid for private comprehensive motor insurance was £511, up 7% on the previous quarter.
- The average price paid by motorists renewing their cover rose by £36 on the previous quarter to £471, while the average premium for a new policy was up £21 to £566.The distinction reflects the different risk profile of new and renewing customers. For example, a new customer may be more likely to be a younger, less experienced driver.
Rising costs for insurers
Higher premiums reflect continued rising costs for insurers. In total, insurers paid out £2.4 billon in all motor insurance claims – theft, vehicle repairs and personal injury – in the first quarter of this year. This was up 14% on Quarter 1 2022.
The costs of vehicle repairs leapt by 33% over the year since Quarter 1 2022 to £1.5 billion, the highest figure since ABI started collecting this data back in 2013. This reflects rising costs including energy inflation and more expensive repairs. Increases in labour costs were reported up to 40% and the cost of replacement parts for many popular cars have increased between 12 -21% over the past year.
Mervyn Skeet, the ABI’s Director of General Insurance Policy, said: “These continue to be tough times for many motorists and motor insurers alike. With many families facing higher cost of living bills, no one wants to see the cost of their motor insurance rise. Insurers remain determined to ensure that motor insurance remains as competitively priced as possible, but this has become increasingly challenging, given the continued rising costs that they are facing.”
Keeping costs down
Despite the doom and gloom there are some positives for drivers. It is always worth talking to an insurance broker such as Asprey Harris who are well placed to find their customers the best possible price for motor insurance. Their relationships with major insurance companies plus their knowledge of the smaller, more specialised companies give them a wider pool from which to source the most competitive premiums currently available.
And don’t forget that it will always cost you less to purchase insurance cover for your vehicle than the fines and costs you will face if you are caught driving uninsured.