Motor Insurance Premiums Continue to Rise as Insurers Battle Costs

Figures released today show the average price paid for motor insurance has continued to rise. Costs are up 12% on the previous quarter (Q4 vs Q3 2023), driven by record increases in the cost to insurers to pay claims. This means motor cover was 25% more expensive on average across the whole of 2023 than in 2022.

This comes from the ABI’s Motor Insurance Premium Tracker, covering the fourth quarter of 2023. The tracker is the most comprehensive in the UK, analysing nearly 28 million policies sold a year. It’s also the only collection that is based on the price customers pay for their cover rather than what they are quoted (which typically delivers higher averages¹).

It shows that between 1 October and 31 December 2023:

• The average premium paid for private motor insurance was £627, up 12% on the £562 of the previous quarter.
• The current average premium is 34% higher compared to Q4 2022, when it was £470.
• When looking at annual averages, motor premiums were 25% more expensive in 2023 than in 2022 (£543 vs £434). ²­

COST PRESSURES CONTINUE BUT INSURERS FOCUSED ON ACTION NEEDED TO SUPPORT MOTORISTS

While like-for-like Q4 figures for claims costs are yet to be finalised, previous quarterly and annual claims data has shown a clear picture of spiking costs for insurers.³ Payouts for vehicle thefts rose 35% in Q3 2023 (vs Q3 2022), longer repair times drove up the cost of providing replacement vehicles by 47% in the same period and the cost to replace written-off vehicles has increased as the average costs of new cars rise (up 43% over a five-year period) ⁴.

However, the largest single factor is repair costs, which jumped 32% in Q3 to £1.6bn of the total £2.54bn. This reflects a mixture of cost of labour, energy and also the fact that vehicles are becoming more sophisticated, with the likes of electric vehicles requiring ever more specialist expertise to repair. Early research suggests that electric vehicles are approximately 25% more expensive to repair than their petrol equivalents and take 14% longer to fix. ⁵

The end result is that insurers are spending more on claims and costs than they are collecting in premiums. Analysts at EY estimate that in 2022 for every £1 motor insurers received in premiums, they paid out £1.11 in claims and operating costs. EY also forecasts that in 2023, insurers will have paid out £1.14 in claims and operating costs for every £1 received in premiums.

But the industry is aware of the need for action.

Mervyn Skeet, the ABI’s Director of General Insurance Policy, said:

“We’re acutely aware of the impact that rising motor insurance premiums continue to have on motorists. Rising repair costs and other factors outside of insurers’ control mean there is no single action that could bring down premiums. However, we are determined to do all we can to put the brake on.

“We are working with our members to understand what actions can be taken to help motorists manage costs. The cost of paying monthly (premium finance) is one of a number of topics we continue to discuss with our members and the Financial Conduct Authority (FCA). We’ve also been very clear, and continue to underline, that cutting Insurance Premium Tax would provide immediate relief for stretched consumers. We will be saying more, as we can, on other steps we will take in the coming weeks.”

Insurance Premium Tax (12%) currently adds £67 to the average motor premium.

 

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Notes to Editors

Footnote 1. Data from price comparison site indices produce higher averages than price data because they are typically based on an average of multiple quotes and comparison sites attract a cross section of drivers not typical of the wider UK average. More on this on our blog.

Footnote 2. Prices changes quarter to quarter:

2022 Q1 >> 2023 Q1: 15%

2022 Q2 >> 2023 Q2: 21%

2022 Q3 >> 2023 Q3: 29%

2022 Q4 >> 2023 Q4: 34%

Compared to the overall annual comparison: 2022 >> 2023: 25%

Footnote 3. ABI’s Q3 motor claims data

Footnote 4. Autotrader price index

Footnote 5. Thatcham Research

 

Enquiries to:

Malcolm Tarling	020 7216 7410	Mobile: 07776 147667
Helen Mitchell	020 7216 7411	Mobile: 07834 328512
Heidi Pullig	020 7216 7340	Mobile: 07595 106221

 

The ABI is the voice of the UK’s world-leading insurance and long-term savings industry, which is the largest sector in Europe and the third largest in the world. We represent more than 300 firms within our membership, including most household names and specialist providers, providing peace of mind to customers across the UK.

We are a purpose-led organisation: Together, driving change to protect and build a thriving society. On behalf of our members, we work closely with the UK’s governments, HM Treasury, regulators, consumer organisations and NGOs, to help ensure that our industry is trusted by customers, is invested in people and planet, and can drive growth and innovation through an effective market.

A productive and inclusive sector, our industry supports towns and cities in building a balanced and innovative economy, employing over 300,000 individuals in high-skilled, lifelong careers, two-thirds of whom are outside of London. Our members manage investments of £1.5 trillion, pay over £17.2 billion in taxes to the Government and support the UK's communities and businesses.

  

More news and information from the ABI is available on www.abi.org.uk .