The average cost of comprehensive motor insurance has surged by a third (33percent) or £157 in the first quarter of this year compared to the same period last year, according to data from the Association of British Insurers (ABI).
The ABI’s analysis of policies sold found the typical price paid in the first quarter of 2024 was £635, a slight one percent increase on the previous quarter.
In contrast, the average premium for private comprehensive motor insurance in the first quarter of 2023 was significantly lower at £478.
The ABI suggests that the modest one percent quarterly increase signals a slowdown in the steep rises witnessed in 2023.
Despite the increasing costs, insurers are still absorbing them, with the average claim paid rising eight percent to reach a record high of £4,800 over the same period.
Claims inflation is yet to stabilise, with the costs of repairs, replacement vehicles and theft all on the rise, according to the ABI.
The ABI’s motor insurance tracker, which analyses nearly 28 million policies sold annually and the claims made against these policies, provides these insights.
Previously, the association has attributed the overall cost pressures to factors such as energy inflation, rising prices for paint and other raw materials, increased courtesy car costs and the higher cost of second-hand cars.
Over a longer period, the association noted that motor insurance has closely tracked inflation.
According to the Association of British Insurers (ABI), prices are now £8 or 1.3 percent higher than the previous peak at the end of 2017, with the pandemic having caused a significant drop in prices.
The ABI has highlighted that 2023 was a “difficult year” for motor insurance margins and since 2017, the costs for insurers to pay claims have surged by 23 percent in real terms.
Mervyn Skeet, the ABI’s head of general insurance policy, commented: “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.”
He further stated: “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.”
In February, the ABI outlined measures the industry is implementing to address the escalating costs of motor insurance. Recently, it announced that its members had agreed on a set of principles aimed at assisting those who pay for their insurance monthly.
The ABI advises anyone struggling with insurance costs to contact their insurer for support.
Dame Angela Eagle, a member of the Treasury Committee, expressed concerns during an April hearing into insurance, saying: “My constituents and many people who write to the committee feel that insurance is becoming more of a rip-off.”
He voiced his concerns, saying: “Because the price is going up, it’s harder to make a claim; people, when they do make a claim, often have to wait a very long time or aren’t dealt with very fairly.”
“And that’s particularly the case for insurance that’s compulsory, such as driving insurance.”
At a later Treasury Committee session, Charlotte Clark, director of regulation at the Association of British Insurers (ABI), explained the spike in motor insurance prices. She stated: “it’s coming off the back of the pandemic, where motor insurance in particular was reduced quite significantly, because the risks of being in a car accident when you’re at home are quite low”.
At the same committee meeting, Matt Brewis, director of insurance at the Financial Conduct Authority (FCA), shared that the regulator is reviewing the way inflation has impacted the motor industry.
He mentioned that the FCA is in talks with price comparison websites, brokers and consumers “to understand the concerns of consumers and where they are seeing issues”.
