Average cost of UK car insurance rises by one-third in a year, analysis finds

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The average price paid for comprehensive motor insurance in the UK was about a third (33%) or £157 higher in the first quarter of this year than a year earlier, according to figures from the Association of British Insurers (ABI).

Based on analysis of policies sold, the typical price paid in the first quarter of 2024 was £635, marking a 1% increase on the previous quarter, the ABI said.

In the first quarter of 2023, the average premium paid for private comprehensive motor insurance was £478.

The ABI said the 1% quarterly increase indicated an easing of the rises seen in 2023.

It said insurers were continuing to absorb growing costs, with the average claim paid rising 8% to reach a record of £4,800 over the same period.

Claims inflation has yet to stabilise, with the costs of repairs, replacement vehicles and theft all rising, the ABI said.

The ABI’s motor insurance tracker analyses nearly 28m policies sold a year, and the claims paid against policies.

The association has previously cited costs such as energy inflation, rising prices for paint and other raw materials, rising courtesy-car costs and the increased cost of secondhand cars as adding to overall cost pressures.

Over the longer term, motor insurance has tracked very close to inflation, the association said.

In real terms, prices are £8 or 1.3% higher when compared with a peak at the end of 2017, according to the ABI. This is partly because prices fell significantly during the coronavirus pandemic, it said.

It added that 2023 was a “difficult year” for motor insurance margins, and that costs for insurers to pay claims have increased by 23% in real terms since 2017.

Mervyn Skeet, the ABI’s director of general insurance policy, said: “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.

“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 set out steps that the industry is taking to combat the rise in the cost of motor insurance. Last week it announced that its members had agreed measures aimed at helping manage the costs for people paying for insurance on a monthly basis.

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The association said it recommended that people struggling with the cost of their cover speak to their insurer.

Earlier in April, the Treasury select committee member Dame Angela Eagle told a hearing on insurance: “My constituents and many people who write to the committee feel that insurance is becoming more of a rip-off.

“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.”

In another Treasury select committee session later that day, Charlotte Clark, the ABI’s director of regulation, said part of the reason that rises in motor insurance might look so significant was that “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”.

Matt Brewis, the director of insurance at the Financial Conduct Authority, told the committee the regulator had been looking at evidence of how inflation had affected the motor sector.

He said the regulator was meeting with price comparison websites, brokers and consumers “to understand the concerns of consumers and where they are seeing issues”.

Source: theguardian.com

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