Cost of UK car insurance up by a third compared with just 2% in France

Comparisons in the cost of car insurance show stark rises in the UK compared with significantly lower increases for cover across the rest of Europe.

According to the Association of British Insurers (ABI), car insurers paid out record £9.9 billion in claims in 2023- an average of £1.13 million every hour and the highest annual figure since ABI records began in 2013 (and an 18% increase in the £8.4 billion paid out in 2022).

However, ABI also acknowledged that UK motor cover has increased by an average of 34%. Many drivers are reporting even steeper rises; some owners of Electric Vehicles (EV) have reported that their insurance costs have doubled in the last year, with some billed £5,000 or more.

In comparison, car premiums increased by only 6% in Italy, 5% in Spain and 2% in France over the same period, according to recent figures published by Admiral. Germany, with country with the biggest European car market, has seen a larger increase in premiums than its European counterparts at 11-13, but still well below rises in the UK.

As the cost-of-living crisis rages on, the increase in motor premiums is exacerbating financial pressure for many households and even leading drivers to consider giving up their cars. Research from Green Insurer revealed that 51% of car owners were worried that rising premiums would cause them to have to stop driving and 32% said they had given up driving in the past two years and cited the cost of insurance as a reason. Worryingly, one in five people admitted to not being completely truthful upon policy renewal to secure a reduced premium.

The disparity between UK insurance payouts and the substantial rise in the cost of cover has led many to question insurers’ pricing strategies, and could reignite calls for an investigation into the motor insurance market and the fairness of premiums,

Among those urging the government to force “closer scrutiny of the industry” is MP Carla Lockhart, citing her constituents’ frustration at the “exorbitant cost” of insurance at a parliamentary debate.

Despite calls from parliamentarians and consumer advocates, the FCA has so far ruled out an investigation, stating that it does “not set or control insurance prices” but is “monitoring the motor insurance market closely to ensure customers are receiving fair value”.

ABI, however, attributes the rise in premiums to increased expenses for insurers; figures released by ABI on 6 April reveal that 2023 saw a 31% rise in vehicle repair costs, 23% rise in payouts after vehicle theft and 35% jump in the cost of providing temporary replacement vehicles for insurers.

Jonathan Fong, ABI’s manager for general insurance policy, emphasised that despite the fact “[s]ignificant and sustained cost pressures faced by insurers […] have impacted on the cost of cover”, “insurers continue to do all they can to ensure competitively priced motor insurance” and urged customers to shop around to find a competitively priced policy. The ABI recently published a roadmap setting out how the industry plan to combat rising insurance costs.

Admiral cites the UK’s unlimited liability framework as the reason premiums are higher than in other EU countries, noting: “Injury claims across the countries are different and subject to different drivers of inflation and Italy, Spain and France saw different degrees of inflation compared with the UK and have different structures,”.

Nonetheless, as the cost-of-living crisis continues to increase pressure on both customers and insurers, questions surrounding the fairness of policy pricing will continue to be asked, with motor insurers facing renewed pressure to demonstrate value for money and evidence competitive pricing strategies.