The average price paid by motorists for their motor insurance has risen only marginally by 2% over the last year despite sustained rising cost pressures faced by insurers according to the ABI’s latest Motor Insurance Premium Tracker published today.
The ABI’s Tracker is the only survey that looks at the price consumers pay for their cover, rather than the price they are quoted.
According to the latest Tracker, in the third quarter of this year:
· The average premium paid for private motor insurance was £436, up 2% over the year since quarter 3, 2021, and up 3% on Q2 this year.
For some time, the ABI has warned that insurers have been finding it increasingly challenging to absorb rising costs, such as more expensive repairs and rises in second-hand car prices: The average cost of repairing vehicle damage under a policyholder’s own motor policy jumped by 16% to just over £3,000 in the year to quarter 2, 2022. This reflects increasing vehicle sophistication, leading to more expensive repairs as well as rises in the costs of raw materials such as paint.
The continued shortage in semiconductor microchips and global supply chain issues, made worse by the Russian invasion of Ukraine, have led to longer waiting times for many new vehicles and vehicle parts. This has contributed to a rise in the demand for second hand cars, with used car prices up on average 30% in 2021 (source: Auto Trader).
The Financial Conduct Authority introduced new rules on the pricing of motor and home insurance on 1 January this year. The rules ensure that the price paid by renewing customers 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.
Jonathan Fong, ABI’s Senior Policy Adviser, General Insurance, said:
“Insurers recognise that these continue to be difficult times for many households dealing with the rising cost of living. Like many other sectors, motor insurers are facing sustained higher costs, which are becoming increasingly challenging to absorb. Despite this they continue to do all they can to keep motor insurance as competitively priced as possible”.