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Car insurance premiums up a third in a year – but prices are ‘stabilising’

Car insurance premiums up a third in a year – but prices are ‘stabilising’
Emma Lunn
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Emma Lunn

The average cost of comprehensive car insurance has gone up 33% – or £157 – in the past year, according to data from the Association of British Insurers (ABI).

An analysis of policies sold revealed that the typical price paid in the first quarter of 2024 was £635, compared to the £478 paid in Q1 2023.

However, motor premiums increased by just 1% in the first quarter of 2024, compared to the previous quarter (Q4 2023). The ABI said this indicated that premiums were stabilising.

The trade body said that insurers were absorbing growing costs, with the average claim paid rising 8% in the past year to reach a record of £4,800. The cost of repair, replacement vehicles, and theft have all risen.

The data comes from the ABI Motor Insurance Tracker (Q1 2024). This analyses nearly 28 million policies sold per year and the claims paid against these policies. It’s the only data analysis that is based on the price customers pay for their cover rather than what they are quoted.

The ABI noted that, over the long term, motor insurance has tracked very close to inflation. In real terms, prices are just £8 more (+1.3%) when compared to the previous ‘peak’ at the end of 2017. This is partly because prices fell significantly during the pandemic.

In contrast, over the same period (from the end of 2017 to now), costs for insurers to pay claims have risen by 23% in real terms. According to Ernst Young (EY), for every £1 collected in car insurance premiums in 2023, the industry paid out £1.14 in claims and expenses.

Drivers faced with ‘perfect price storm’

Mervyn Skeet, the ABI’s director of general insurance policy, said: “We understand that car insurance costs are putting pressure on household finances. These figures show how competitive the motor market is, with insurers absorbing significant cost rises but keeping prices relatively stable.

“Even though these figures demonstrate a slowdown in price increases, we won’t be taking our foot off the gas when it comes to our work on tackling the cost of cover.”

Michael Foote, founder of comparison site Quotegoat.com, said: “During the pandemic, essential trips were the only ones we were allowed to take, leading to a significant decrease in cars on the roads and a subsequent dip in car insurance costs. However, as the world gradually returned to normal, road traffic has increased, elevating the risk of accidents and consequently driving insurance costs back up. This, combined with the escalating expenses associated with providing insurance – such as higher energy costs, increased prices of paint, and the provision of courtesy cars – has created the perfect price storm.

“Many drivers are now confronted with exorbitant insurance premiums, placing strain on household budgets. It’s crucial not to automatically renew your car insurance without exploring alternative options and reassessing factors such as mileage, coverage level, and excess. With a bit of dedicated research, savings can be found.”

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