In 2022, Stephen Sangster had an uneventful year driving his new Dacia Jogger, covering 6,000 miles without any accidents or traffic violations. However, he was shocked when his car insurance renewal quote arrived and the price had increased by a staggering 90%.
Sangster expressed his disbelief, stating, “My quote has come through 87% higher, and that’s with no accidents, points, or anything else that would increase my risk. With inflation where it is, you would expect a 10%-15% increase, but this is such a significant jump.”
While the recent cost of living bulletin from the Office for National Statistics showed a decrease in inflation to 7.9% in June, primarily due to decreased petrol and diesel prices, it also revealed a 50.9% increase in car insurance prices over the past year. This increase has hit families, who already have to budget for council tax and energy bills, particularly hard.
The Dacia Jogger was initially praised as the most affordable seven-seater on the market, making it an appealing option for budget-conscious households. However, members of a Facebook group dedicated to the car, including Sangster, are now sharing horror stories as they receive their insurance quotes for the coming year.
Sangster explains, “It’s a basic, affordable family car, which attracts cost-conscious buyers. When I discussed insurance costs with others, it seemed that renewing in March or April wasn’t too bad, but since then, prices have skyrocketed.”
Data shows that car insurance prices have risen by 50.9% in the past year. Sangster’s renewal offer from Admiral went from £328 in 2022 to £614, and even after searching online, the cheapest deal he could find was from Churchill, which still cost 40% more for a less comprehensive policy.
Notably, other Direct Line and Saga customers have also raised concerns about their renewal quotes for 2023. One driver reported that Saga had increased the cost of insuring her four-year-old Audi TT by 77% to £2,044, despite her unchanged driving record. Fortunately, she was able to find a cheaper alternative.
According to market research firm Consumer Intelligence, the average car insurance quote increased by 34% in the year leading up to May. Policies now cost an average of £2,145 for under-25s, £850 for those aged 25-49, and £568 for those over 50. Additionally, there are fewer telematics policies available, which are usually a cheaper option for new drivers.
While consumers struggle with rising food and energy costs, they fear that they are being taken advantage of to boost insurers’ profits. However, experts argue that insurers are not necessarily profiting from these increases. Car insurance is known for its slim profit margins, and many companies were caught off guard by the substantial rise in claim costs in 2022. Higher premiums are an attempt to recover from these losses.
As the timing of new car registrations falls in September, it is a significant month for insurance renewals. Ian Hughes, the CEO of Consumer Intelligence, warns that when Britons return from their summer holidays, they “will be in for a big shock.”
Car insurance has become more complex as companies use different logos or offer branded policies similar to supermarket food ranges. The cheapest policies often exclude standard features and have higher compulsory excess amounts, which means policyholders must pay more out of pocket in the event of a claim.
James Daley, the managing director of the research foundation Fairer Finance, blames price increases on the Financial Conduct Authority’s decision to ban “price walking” in 2021. This practice involved charging loyal customers higher premiums than new customers, resulting in a loyalty penalty. While this decision has brought prices down for some, it has also caused premiums to rise for those who shopped around less.
Daley criticizes the “hollowing out” of insurance products, where insurers offer seemingly competitive prices by removing standard features. This has led to confusion among consumers, as some policies do not cover basic things like windscreen damage.
After thoroughly researching price comparison sites, Sangster found a slightly cheaper deal with Churchill. However, it still cost over 40% more and came with compromises, such as a higher excess and no coverage for driving in Europe. Armed with this information, he negotiated with Admiral and received an improved quote of £482, a 47% increase from his 2022 premium.
Sangster reflects on the affordability of insurance premiums, stating, “When it was £300 a year, you could pay it as a one-off sum, but when it’s double that, you start to think it might be more affordable to pay monthly. However, you end up paying interest as well. Not many people can handle such a cost in one go.”
According to the Association of British Insurers, motor insurers paid out £2.4 billion in motor claims in the first three months of 2023, a 14% increase from the same period the previous year. This was the highest quarterly payout in a decade. Rising energy costs and more expensive repairs contributed to a 33% increase in vehicle repair costs to £1.5 billion. The cost of providing replacement cars also rose by 29% due to longer repair times. Payouts for vehicle theft increased by the same amount due to higher prices for secondhand cars, totaling £152 million. In addition, insurers paid out £642 million in personal injury claims.
Laura Hughes, the ABI’s manager of general insurance, emphasizes that motor insurers are doing their best to deliver competitive insurance premiums and provide quality claims service in a challenging market. She acknowledges that motor insurers face increasing cost pressures and rising expenses but emphasizes their commitment to serving motorists and claimants.
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