Perfect Storm on Motor Claims Pushes Premiums Higher

Everyone in the sector knows that motor premiums have been rising since the end of the Covid lockdowns. Despite the switch to WFH, especially in the public sector, which has reduced much of the early morning commuter traffic, UK roads remain busy most days. This is particularly true of Fridays and weekends, when the new, wealthier WFH employees take time to visit shops, relatives, tourist attractions or simply drive to the airport for an overseas break.

That shift in lifestyle has actually concentrated more traffic at weekends. Just check Twitter or Google on Fridays for road delays or accidents. The gridlock has been aided by Councils and the UK government, who have constructed more cycle lanes, LTNs, placed physical obstacles in the roads, plus deliberately neglected the road surfaces so more potholes and dangerously obscured signage and markings help to create more hazards. Add in rising claims costs from dealing with recovery of three tonne electric vehicles, EV storage, supply chain parts issues and increased labour costs. Modern cars are also packed with sensors, all of which need recalibrating and signing off before handover. This can mean a dented front bumper makes a car a write-off.

Perfect storm.

Here’s the word from Confused.com

Comprehensive car insurance premiums have soared by a record 40% (£222) during the last 12 months, with UK motorists now paying £776 on average, according to the latest Confused.com Car Insurance Price Index in association with WTW (NASDAQ: WTW), a leading global advisory, broking and solutions company.

Car insurance premiums are at their highest ever recorded levels since the WTW/Confused.com Car Insurance Price Index was launched in 2006. The previous peak was 12 years ago in the second quarter of 2011 when the average premium was £663. At 40%, the annual rise in motor insurance costs continues to outstrip CPI inflation, held at 8.7% in May.

Car insurance premiums have also increased for seven straight quarters following a price rise of 18% (£119) in the second quarter of 2023, according to the longest established and most comprehensive car insurance price index in the UK. Based on price data compiled from over six million customer quotes per quarter, this is the largest quarterly increase on record and by a significant margin. The previous fastest quarterly rise was set in the second quarter of 2010, when prices rose by 12%.

Tim Rourke, UK Head of P&C Pricing, Product, Claims and Underwriting at WTW, said: “Motorists are facing the sharpest acceleration in premium rates, as insurers continue to grapple with a cocktail of rising costs. High levels of claims inflation are being driven primarily by the sharp rise in used car prices, amplified by rising vehicle theft, spare part delays, longer repair times and higher wages, all pushing costs above premium income and forcing insurers to play catch up by increasing prices.”

All regions across the UK recorded soaring double-digit price rises in insurance premiums over the last 12 months, ranging from 35% for drivers in Central and North Wales, taking their annual premiums to £523, to the largest annual percentage increase of 45% recorded in Central Scotland where average premiums now cost £691.

The South West of England continues to be the cheapest region for car insurance, with average premiums now costing £509. Inner London remains the most expensive region, where prices are now on average £1257 having increased in the last 12 months by 43% (£375). Meanwhile, the average cost of car insurance in Outer London has for the first time exceeded £1000, where drivers now pay an average bill of £1003.

Manchester / Merseyside (£965) and the West Midlands (£940) remain the most expensive areas outside of the capital, after recording increases of 38% and 43% respectively during the last 12 months.

More locally focused data shows motorists in Kilmarnock experienced the sharpest annual rises of 47% taking their average premiums to £613. Kirkwall, the capital of the Orkney Islands, is the least expensive town in the UK with prices on average now costing £461.

Drivers aged 17-20 took the largest hit of any age group. Male drivers in this age bracket experienced an annual percentage increase of 60% (£903) taking their premiums to £2414, with prices not seen at this level since 2012. Female drivers from the same age group saw their premiums surge by 61% (£652) during the last 12 months to a record £1728.

Steve Dukes, CEO at Confused.com comments: “Consumers are facing rising costs across the board, and car insurance is no exception. But the price increases we’re seeing are so significant that it’s going to cause real financial impact to many people. We know that there’s a lot of factors going into this, with inflation pushing up the cost of claims for insurers.

“But as an industry we have to help drivers understand where they can save money when it comes to renewing their policies. We know a lot of drivers are shopping around and switching, so now is the time for insurers to be as competitive as they can be. Doing so means there’s a higher chance of winning new business, but also helping drivers by not adding to the already strained financial pressures many are facing.”