That’s according to the Association of British Insurers
The average price paid for motor insurance has surged by just over a fifth (21%), or nearly £90 in cash terms, over the past year, to reach the highest levels since records started in 2012, according to the Association of British Insurers (ABI).
The average premium paid for private comprehensive motor insurance in the second quarter of 2023 was £511, which was also up by 7% on the previous quarter.
Back in the second quarter of 2022, the average price paid for motor insurance was £88 less, at £423.
The ABI said “sustained cost pressures” faced by insurers, such as vehicle repairs, energy costs and labour rates, have pushed up the price of motor insurance.
It said that, in total, insurers paid out £2.4 billion in all motor insurance claims – including theft, vehicle repairs, and personal injury – in the first quarter of this year.
This was a 14% increase compared with the first quarter of 2022.
Within this, the cost to insurers of vehicle repairs leapt by a third (33%) over the year to reach £1.5 billion, marking the highest figure since the ABI started collecting this data back in 2013.
This reflects rising costs, including energy inflation, and more expensive repairs, the ABI said.
It added that one insurer had observed a 40% rise in labour rates between June 2022 and January this year.
The costs of replacement parts for many popular cars have increased by as much as a fifth over the past year, the association added.
The ABI’s analysis is taken from 28 million motor insurance policies sold over the past year, including around seven million in the second quarter, to indicate the amounts that UK motorists are actually typically paying for their cover.
Its latest tracker shows that in the second quarter of this year, the average price paid by motorists renewing their cover rose by £36 on the previous quarter to £471, while the average premium for a new policy was up by £21 to £566.
These figures reflect the different risk profile of new and renewing customers.
For example, a new customer may be more likely to be a younger, less experienced driver, the ABI said.
Financial Conduct Authority (FCA) rules on the pricing of motor and home insurance introduced on January 1 2022 ensure that the price paid by renewing customers for motor and home insurance is no greater than the price charged to an equivalent new customer for the equivalent policy bought through the same distribution channel, such as through an insurer, broker, or price comparison website.
The rules do not set or cap the level of premium paid by new or existing customers.
Mervyn Skeet, the ABI’s director of general insurance policy, said: “These continue to be tough times for many motorists and motor insurers alike.
“With many families facing higher cost-of-living bills, no-one wants to see the cost of their motor insurance rise.
“Insurers remain determined to ensure that motor insurance remains as competitively priced as possible, but this has become increasingly challenging, given the continued rising costs that they are facing.
“We would urge anyone concerned about being able to afford their insurance to speak to their motor insurer to see what options might be available. And despite cost pressures, it can still pay to shop around to get the policy that best meets your needs at the most competitive price.”
Jenny Ross, editor of Which? Money, said: “Car insurance premiums reaching record highs comes at the worst possible time for consumers already battling cost pressures in a number of other areas, and motorists may be wondering whether insurers passing on increased costs is justified at this time.
“The Financial Conduct Authority’s new consumer duty will mean that insurers need to be able to demonstrate the products they are selling offer fair value. If they can’t justify them, they should face action from the regulator.”
Published: by Radio NewsHub