The average motor insurance premium fell by 2% in the period April to June 2024 (Q2) compared to January to March 2024 (Q1), according to the latest data from the Association of British Insurers (ABI).
Drivers typically paid £622 for insurance in Q2, with the latest drop following a 1% increase to premiums in Q1 2024.
This is a small but significant dip as it’s the first time in two years that the ABI has recorded a decline.
But despite the cost of cover falling, drivers are still paying 21% more for insurance than this time last year.
The ABI said the cost of claims has had a significant and sustained impact on motor premiums, but that the pressure on claims costs appeared to have eased this quarter, with the average claim paid remaining stable (+0.4%) after an 8% rise in Q1.
The ABI’s latest claims data showed that over the past 12 months insurers paid out £2.9bn in motor insurance claims, up 18% on the £2.5bn paid in Q2 2023.
Indeed, 2023 was a difficult year for motor insurance margins, with EY estimating that for every £1 collected in premiums, the industry paid out £1.13 in claims and expenses.
But, the average cost of theft of a vehicle fell 10% to £12,100. However, the average cost of theft from a vehicle hit a record high of £3,100.
‘Motorists certainly hope this trend continues’
Mervyn Skeet, ABI director of general insurance policy, said: “After a very challenging period for insurers and customers alike, we’re encouraged to see an easing of increases to motor insurance premiums as recent claims costs stabilise. While this is good news, we need to continue our work focusing on claims costs, for the good of consumers. It remains a top priority for us and our member insurers.”
Over the long-term and in real terms (accounting for inflation), the average premium paid is now £12 lower than peak prices in Q4 2017. This is a 2% drop, whilst over the same period the average cost of a settled claim has risen by 21%.
Rocio Concha, Which? director of policy and advocacy, said: “It’s encouraging to see premiums starting to fall, and motorists will certainly hope this trend continues. However, with premiums rising significantly over the past year, many drivers opening their renewal quotes will still get a nasty shock.
“To make matters worse, drivers who can’t afford to stump up for annual cover all in one go, and instead pay monthly, can end up paying hundreds of pounds more over the course of a year due to the high levels of interest charged on payments.
“The Financial Conduct Authority must clamp down on insurers penalising poorer motorists by setting out a clear timeline for when it will stop firms charging excessive rates of interest on monthly payments, as well as publishing a league table of firms, naming and shaming the worst providers.”
Tom Banks, motoring expert at Go.Compare car insurance, said: “It’s great news that the ABI’s latest figures show car insurance costs are coming down. This is going to be really welcome news for customers – and our own price index for car insurance showed that the average cost of premiums fell £18 between Q4 of 2023 and Q1 of 2024.
“At the same time, though, the Go.Compare car insurance index revealed that while costs were falling, the average policy is still £100 more than it was a year before, meaning that car insurance is still a significant cost for motorists and continues to add pressure while we are in a cost-of-living crisis. This means that it’s just as important for policyholders to make sure that they are getting the best deal on their policy.”
Banks added that its recent research revealed that around four million motorists (almost 10%) let their annual premiums automatically renew without shopping around, “potentially missing out on significant savings”.
