Drivers have witnessed a significant surge in the average price of motor insurance over the past year, reaching the highest levels since 2012. The average premium for private comprehensive insurance in the second quarter of 2023 was £511, marking a 7% increase compared to the previous quarter. In the second quarter of 2022, drivers paid an average of £423, which was £88 lower than the current price. The Association of British Insurers (ABI) attributes this rise to sustained cost pressures faced by insurers, including more expensive vehicle repairs, soaring energy costs, and higher labor rates.
In the first quarter of this year, insurers paid out a total of £2.4 billion in motor insurance claims, covering theft, repairs, and personal injury, representing a 14% increase from the same period in 2022. Vehicle repair costs alone rose by 33% to reach £1.5 billion, the highest figure since the ABI started collecting this data in 2013. Labor rates increased by 40% between June 2022 and January this year, while the costs of replacement parts for popular cars rose by up to 20% over the past year.
The ABI’s analysis is based on 28 million policies sold in the past year. Their latest tracker reveals that during the second quarter of this year, when 7 million policies were sold, the average price paid by motorists renewing their insurance increased by £36 to £471 compared to the previous quarter. The average premium for a new policy also rose by £21 to £566.
While Financial Conduct Authority (FCA) rules ensure that the price paid by renewing customers is not greater than that for a similar new policy bought through the same distribution channel, they do not set or cap the premium level. Mervyn Skeet, the ABI’s director of general insurance policy, expressed concern about the rising costs and urged motorists to speak to their insurers to explore available options. He also encouraged drivers to shop around for the most competitive price despite the cost pressures faced by insurers.
Jenny Ross, editor of consumer magazine Which? Money, added that the surge in premiums comes at a difficult time for consumers already facing cost pressures in other areas. She highlighted the importance of insurers justifying the prices they charge with the implementation of the Financial Conduct Authority’s new consumer duty. If insurers fail to justify these prices, they could face regulatory action.
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