9:21 am, August 5, 2024
Average motor insurance premiums are more than a fifth higher now than they were a year ago – despite premiums falling over the past quarter.
That’s according to new figures published today by the Association of British Insurers (ABI).
The average price paid for motor cover fell by £13 when comparing the period April to June with January to March – the first quarterly decrease in two years, said the ABI.
Typical motor insurance premiums fell by 2% in April to June this year versus 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.
But in spite of the quarterly drop in premiums, on an annual basis average premiums were 21% – or around £111 – higher in the second quarter. In 2023’s Q2, the average premium was £511.
Claims costs appear to have stabilised, the trade association said.
However, the ABI added that insurers still paid out £2.9bn in motor insurance claims in the second quarter of this year, which was up by 18% on the £2.5bn dished out in the second quarter of 2023.
Repair costs have also risen, while the average cost of theft from a vehicle has hit a record high of £3,100, the ABI commented.
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.
In June, ahead of the election, Louise Haigh, who is now the transport secretary, said Labour would ‘urgently call in the regulators to crack down on any unfair practices and to come clean on the causes of soaring costs for consumers’.
City regulator the Financial Conduct Authority (FCA) is ‘monitoring the market closely to ensure customers are getting fair-value cover’, reported The Times.
The FCA also recently increased its examination of premium finance, which lets people spread the cost of insurance payments, as well as its scrutiny of Gap (guaranteed asset protection) policies.
Insurers blame rising vehicle premiums on rocketing costs of dealing with claims.
Higher prices for spare parts as well as for used cars, plus increasing wages and supply chain issues in garages, are also cited as having caused ‘claims inflation’, leading to higher premiums.
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.’
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.
Main image credit: Ben Birchall/PA
