The cost of car insurance in the UK has surged by one-third within a year, with comprehensive motor insurance premiums averaging £635 in the first quarter of 2024, according to the Association of British Insurers (ABI). This represents a 33% increase compared to the same period last year, amounting to £157 more per policy.
The ABI’s analysis of nearly 28 million policies sold annually revealed a 1% uptick in premiums from the previous quarter. In contrast, the average premium paid in the first quarter of 2023 stood at £478.
Insurers continue to grapple with escalating costs, with the average claim payout hitting a record high of £4,800 during this period, reflecting an 8% increase. The ABI cited rising expenses for repairs, replacement vehicles, and theft as contributors to this trend.
The association underscored that while motor insurance costs have closely tracked inflation over the longer term, they remain £8 or 1.3% higher than their peak at the end of 2017. This trend follows a significant decline in prices during the pandemic.
Mervyn Skeet, the ABI’s director of general insurance policy, acknowledged the strain these costs impose on households and highlighted insurers’ efforts to absorb rising expenses while maintaining relatively stable premiums. He emphasized ongoing initiatives to address the affordability of car insurance.
In response to concerns about increasing insurance costs, the ABI announced measures to assist policyholders, including recommendations for individuals facing financial difficulties to engage with their insurers.
The escalating prices were discussed in a recent Treasury select committee hearing, where members highlighted the challenges faced by consumers in accessing fair and timely claims processes. Charlotte Clark, the ABI’s director of regulation, attributed the notable rise in premiums to the rebound effect following pandemic-related reductions in motor insurance risks.
Meanwhile, the Financial Conduct Authority has been investigating the impact of inflation on the motor insurance sector, engaging with industry stakeholders and consumers to better understand their perspectives and concerns.
The ABI’s latest findings underscore the ongoing challenges in the motor insurance market and the concerted efforts by stakeholders to address affordability issues amid rising costs.
