The cost of car insurance in the UK has soared to unprecedented levels, with industry insiders attributing the surge to inflation and a significant increase in vehicle repair expenses.
An examination of 28 million policies revealed that the average premium for the three months leading up to the end of June reached £511, marking a 21% escalation from the same period last year.
Numerous motorists have reached out to the BBC, reporting quotes that have tripled in comparison to the previous year.
The Association of British Insurers (ABI) pointed out that sustained cost pressures are the driving force behind these record highs.
During the first quarter of this year, the insurance sector disbursed a total of £2.4 billion for all motor insurance claims, covering aspects such as theft, vehicle repairs, and personal injury. This marks a 14% rise from the corresponding period last year, as stated by the organization.
The cost of vehicle repairs surged by 33% over the year to reach £1.5 billion, reflective of escalating costs, including energy price inflation.
According to the ABI, one insurer alone disclosed a 40% increase in labor rates between June 2022 and January of this year. Additionally, the cost of numerous replacement parts surged by up to 21%.
Amidst Renewals and New Policies For individuals renewing their coverage, average policies witnessed a £36 increase from the previous quarter, reaching £471. Conversely, the average premium for new policies saw a £21 uptick, amounting to £566.
The ABI clarified that this disparity is due to the "different risk profile of new and renewing customers," noting that new customers "may be more likely to be a younger, less experienced driver."
Impact on Consumers Diane Cedra, a 66-year-old from Solihull in the West Midlands, paid £211.99 to insure her Peugeot 2008 with Saga last year. When her insurance expired on July 31, she received a quote almost three times higher - £620. After adjustments and a customer loyalty bonus, she eventually paid £411. Saga attributed the increase to inflation and the "massive" number of claims it had to settle.
Karl Kemp from Burnley was informed by Churchill that insuring his Range Rover Evoque would cost £1,653.66, up from £925.90 last year, despite no changes in his circumstances. After shopping around, First Choice offered him a figure similar to last year's premium. He noted that an additional £700 on car insurance would have made owning a car unaffordable.
Consumer Perspective Consumer group Which? expressed concern that the record-high premiums are emerging "at the worst possible time for consumers already grappling with cost pressures in various other areas." The organization questioned whether insurers can justify passing on increased costs during these times and highlighted the significance of the Financial Conduct Authority's new Consumer Duty, which demands insurers demonstrate that the products they offer deliver fair value.
A Challenging Landscape In June, a report revealed that 2022 marked the worst-performing year for the UK motor insurance market in a decade. For every £1 received in premiums, motor insurers paid out £1.10 in claims and expenses.
The ABI underscored that its analysis pertains to average premiums paid, not quoted prices. Photo by Nick-D, Wikimedia commons.