In June, analysis from international consultants EY said that “the UK motor insurance market experienced its worst performing year in a decade in 2022’. Their report highlighted that for every £1 motor insurers received in premiums, they paid out £1.10 in claims and operating costs.
Our latest tracker shows that in the second quarter of this year:
The average premium paid for private comprehensive motor insurance was £511, up 7% on the previous quarter. The current average premium is 21% higher compared to Q2 2022 and is at its highest since we started collecting this data back in 2012.
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 £21 to £566.The distinction reflects 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 FCA rules on the pricing of motor and home insurance introduced on 1 January 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 insurer, broker, or price comparison website.
However, the rules do not set or cap the level of premium paid by new or existing customers. The price of cover will continue to reflect a range of factors, including the cost of settling claims. For more information read our insurance pricing FAQs.
Our Tracker:
Covers over 7 million policies sold during the second quarter, and 28m policies sold over the last 12 months. Unlike other motor insurance price indices, ours measures the average price paid not prices. This may lead to our figures being lower, as typically a customer is likely to choose a lower quote to pay.
Unlike some other trackers, it covers both new and renewing customers.
Higher premiums reflect continued rising costs for insurers.
In total, insurers paid out £2.4 billon in all motor insurance claims – theft, vehicle repairs, and personal injury - in the first quarter of this year. This was up 14% on Q1 2022.
The costs of vehicle repairs leapt by 33% over the year since Q1 2022 to £1.5 billion, the highest figure since ABI started collecting this data back in 2013. This reflects rising costs, including energy inflation, and more expensive repairs.
Increases in labour costs reported up to 40%.
The cost of replacement parts for many popular cars have increased between 12 -21% over the past year.
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.”
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