The average price motorists pay for car insurance has fallen for the first time in two years, according to the Association of British Insurers (ABI).
The cost of insuring a motor vehicle over the last two years has been astronomical with many motorists left struggling to pay the high premiums. But it looks as if the price is finally beginning to drop.
In the period of April to June the average cost fell by £13 when comparing with the period of January to March, marking it the first quarterly decrease in two years, according to the ABI. Typical motor insurance premiums fell by 2% in April to June this year compared with the first quarter of 2024, taking the average price paid to £622.
The drop follows a 1% increase to premiums in the first quarter of this year, when the average premium was £635. Despite the quarterly drop in premiums, on an annual basis, average premiums were 21% or around £111 higher in the second quarter of this year. In the second quarter of 2023, the average premium was £511.
Claims costs appear to have stabilised, the ABI said. However, the ABI said insurers still paid out £2.9 billion in motor insurance claims in the second quarter of this year, up by 18% on £2.5 billion paid in the second quarter of 2023.
Repair costs have also increased, while the average cost of theft from a vehicle has hit a record high of £3,100, the ABI said.
It said 2023 was a “difficult year” for motor insurance margins, with consultants EY estimating that for every £1 collected in premiums, the industry paid out £1.13 in claims and expenses. This follows a similar finding in 2022 when the industry paid out £1.11 in claims and expenses for every £1 collected in premiums.
Mervyn Skeet, the ABI’s 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 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.”
The ABI’s tracker analyses nearly 28 million policies sold a year and is based on prices paid for cover rather than quotes.
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.”
