United Kingdom

Analysis reveals that the average cost of car insurance in the UK has surged by one-third over the course of a year

According to data released by the Association of British Insurers (ABI), the average cost of comprehensive motor insurance in the UK has risen significantly, with the first quarter of 2024 seeing a notable increase compared to the same period last year. The figures indicate that policyholders paid around £157 more on average, representing a 33% surge in premiums. In monetary terms, the typical price paid for comprehensive motor insurance in the first quarter of 2024 stood at £635, marking a 1% uptick from the previous quarter. This rise comes in comparison to the average premium of £478 recorded in the first quarter of 2023, signaling a continued upward trend in insurance costs.

The ABI’s analysis underscores the ongoing challenges faced by insurers in managing escalating expenses, particularly with an 8% increase in the average claim paid, reaching a record high of £4,800 during the same period. Rising costs attributed to repairs, replacement vehicles, and theft contribute to claims inflation, posing additional financial burdens on insurers. Despite efforts to absorb these growing costs, motor insurance margins faced significant pressure in 2023, with expenses for insurers to settle claims surging by 23% in real terms since 2017. Mervyn Skeet, the ABI’s director of general insurance policy, emphasized the competitive nature of the motor insurance market and reiterated the association’s commitment to addressing the rising cost of cover. While recent figures suggest a moderation in the pace of price increases, the ABI remains vigilant in its efforts to tackle affordability challenges in motor insurance.

In response to mounting concerns over affordability and fairness, the ABI has outlined measures aimed at managing insurance costs, including recommendations for individuals struggling with premiums to engage with their insurers. However, stakeholders such as Dame Angela Eagle of the Treasury select committee have raised issues regarding the perceived increase in insurance costs, highlighting challenges in making claims and the fairness of claims processing. As regulatory bodies like the Financial Conduct Authority examine evidence of inflation’s impact on the motor sector, collaborative efforts with industry stakeholders are underway to address consumer concerns and mitigate the financial strain associated with rising motor insurance costs.

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