The trade body said Q1 2025 saw the highest quarterly payout since records began in 2013.
The cost of car repairs was the main reason behind increased claim costs, reaching £2.1bn in the quarter. More expensive repair costs have been driven by a number of factors, including replacement parts, higher labour costs, inflation, and a shortage of skilled technicians.
The complexity of modern cars also plays a significant role in expensive repairs. For example, wing mirrors have evolved far beyond simple reflective surfaces and now incorporate actuators, motors, lights, signals, and sensors to enhance functionality and safety.
The ABI said this trend of technological advancement can be seen in every part of a vehicle, from bumpers to windshields, making modern vehicles more sophisticated but also significantly more costly to repair.
The high cost of claims for theft also played a role in the record claims, as the average claim for theft of, and from, a vehicle stood at £11,300.
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Car insurance premiums fall
The ABI found that the average cost of motor cover in the first quarter of the year dropped to £589. This was down 5% on the previous quarter and 7% from the same quarter in 2024.
Mark Shepherd, head of general insurance policy at the ABI, said: “While our latest figures show a drop in average motor insurance premiums, we know the price of cover remains a strain on household finances. Efforts to reduce costs, such as those within our 10 Point Roadmap, have led to some progress, but affordability remains a concern.
“The record claims this quarter underline that work must continue to address claims costs, for the good of consumers. We need the Government to help us do this by addressing the skills and capacity challenge in the vehicle repair sector, improving the UK’s roads and delivering its Road Safety Strategy. We also urge the Government to not raise Insurance Premium Tax at the Autumn Budget – a tax that penalises responsible drivers.”
