ABI Publishes Action Plan to Combat Rising Motor Premiums

The Association of British Insurers (ABI) has published a 10-point roadmap aimed at tackling the rise in motor insurance premiums.  

ABI has published a 10-point roadmap which aims to combat rising insurance premiums for motorists. The plan to bring costs down follows a 25% increase in premiums in 2023.  

Among the actions, which could be initiated or improved by the industry, government, or regulator, are implementing Graduated Drivers’ Licensing to improve driving safety, reducing insurance premium tax (IPT), and increasing consumer access to pricing data.  

ABI figures revealed that the average UK motor insurance premium increased by 12% between the 1 October and 31 December 2023- up from £562 to £627 in a year. Prices have risen due to claims cost inflation, with accounting firm EY estimating that in 2022, for every £1 paid in premiums, insurers sustained £1.11 in claims and expenses. The figure is estimated to have risen to £1.14 in 2023. A fixed 12% rate of IPT, which adds £67 to the average motor policy, has compounded the impact of price rises.   

ABI Director of General Insurance, Mervyn Skeet, stated:  

“We know that insurance costs are putting strain on household finances, so we’ve been working hard to find solutions. Some of these actions we can do quickly, others will require time or assistance from the regulator or government. 

“Regardless, we will continue to do what we can under our new strategy to help consumers access the products that are integral to financial wellbeing and play a key role in the nation’s financial resilience.” 

The action-plan was announced ahead of the publication of ABI’s wider financial inclusion strategy, the purpose of which is to improve customer’s understanding of, and ability to access, insurance, protection, and long-term saving products- which ABI note as “key to households’ financial resilience”.  

ABI members have also pledged improve explanations of how insurance premiums are calculated, and the steps consumers can take to cut costs, increasing aiming to increase transparency and consumer understanding throughout the purchasing process and renewal. In addition, ABI has expanded its online guidance for insurers and consumers.  

Premium finance will also be scrutinised, with ABI noting it is in discussion with the FCA and insurers to explore actions that could be taken, and that cooperation with finance houses and brokers outside of ABI’s direct influence is also being considered.  

Action Plan  

1. Help consumers make informed decisions. The industry will do more on transparency around which vehicles are more costly to insure. E.g. by increasing visibility of the Group Rating system (which rates vehicles on risk). 
2. Combat vehicle theft. ABI is exploring a partnership with the police to aid recovery of stolen vehicles from ports and working with vehicle manufacturers, the Mayor of London’s office, and the National Police Chiefs' Council to explore ways to prevent vehicle thefts. 
3. Tackle fraud and uninsured driving. This will reduce the insurance costs borne by law-abiding drivers. 
4. Improve road safety and road infrastructure. Through campaigns, modern safety measures and road improvement. 
5. Support new and novice drivers. The phased approach of graduated driving licenses has been proven to improve safety.  
6. Reduce the impact of the Personal Injury Discount Rate (PIDR). The rate for large, severe injury compensation needs a rethink as these costs filter back to premiums. 
7. Continue whiplash reform. Reform principles enacted for whiplash should be applied to similar injuries (e.g. bruised knees, sprained ankles). 
8. Advocate for safety-focused vehicle technology. Making assisted safety features mandatory in new cars would contribute to improved road safety. Automated vehicles could revolutionise road safety if legislation ensures user and system safety. 
9. Lower Insurance Premium Tax (IPT) 
10. Support the repair sector. Work with government, vehicle manufacturers and independent mechanics to create a repair sector that can fix a broader array of vehicles, thus, increasing competition and choice for customers.