The indices provide an aggregated view of average insurance premium movements across the big four price comparison websites and key direct insurers. The latest data reveals that the average premium for home insurance jumped up 9.1% in January, while motor rose a lesser 4.9%. The average premium now sits at £154 for home insurance and £705 for motor insurance.
The company’s previous market updates, published towards the end of 2021, revealed that the cost of insurance at that time was falling an average of 8.2% year-on-year for home owners and 7.6% for drivers.
Consumer Intelligence market insight expert, Michael Miskelly, says: “January’s uptick in premiums is stark. Insurers now have to offer the same prices and incentives to renewing customers as they would for an equivalent new customer.
“We fully expected premiums to rise as a result of the new pricing regulations, it was simply a question of how much. We also predicted the larger increase in home insurance. Up until now, the home market has been a beneficiary of high levels of loyalty, but also prone to more extensive price walking.
“Many have asked us whether premiums will continue to rise. The answer is yes, but not as a continued reaction to the new regulations. The large increase seen in January was a one-time step change, signifying the industry’s move to become compliant with the new rules.
“Over the coming months we will most likely see premium fluctuation at brand level as providers jostle to find their place in the new competitive landscape. However, over the next year, underlying upward pressure on costs will likely see both markets harden, and consumers pay more for their motor and home insurance. Factors contributing to this include the rising cost of motor repairs and parts, building materials and labour, among other things.”
Long-term view
In the 12 months to January 2022 the average premium for home insurance rose 2.9%. In contrast the average premium for motor decreased by 2.8%.
Miskelly continues: “This data may seem conflicting, considering we’ve just seen the highest single-month increase of average premiums. However, January’s premium hike was preceded by one of the most sustained and sharp periods of deflation on record.”
Since Consumer Intelligence first started collected pricing data (February 2014 for home and October 2013 for motor), the average premium for home insurance has risen a modest 2.7.%, kept in check by a highly competitive market. In comparison, the average premium for motor insurance has risen 17% since records began.
Age demographics
Of all the age demographics, the over 50s have seen the biggest increases. Homeowners in this age group were subject to a premium increase of 5.8% in the 12 months to January 2022 - with a hike of 10.9% in January alone – and now pay £161 on average. Over 50s drivers saw an increase of 2.7% over the same 12-month period, and 7.2% in January, now paying an average of £360.
Drivers aged under 25 benefitted from the largest premium decrease in the 12 months to January 2022 (-12.2%). This age group was the least affected by the new pricing practices, with a minimal January increase of 0.3%. However, under 25s still pay the most for their motor insurance with the average policy totalling £1,496.
Telematics and usage-based insurance featured heavily among the minority of brands that decreased prices in January. Telematics providers base renewal pricing on driving behaviour data and have by nature avoided the lifetime pricing models that perpetuated price walking. Therefore, unincumbered by a big back book, they are able to price competitively and keep prices down for the youngest age group.
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