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Average cost of UK car insurance increases by one-third in a year
Figures from the Association of British Insurers (ABI) reveal the average cost of comprehensive motor insurance in the UK increased by around a third (33%), or £157, in the first quarter of 2024 compared with the same period last year.
According to the ABI's analysis of policies sold, the typical price paid in the first quarter of 2024 was £635- a 1% increase on the previous quarter. In comparison, the average premium for private comprehensive motor insurance in the first quarter of 2023 was £478.
The ABI claim that the 1% quarterly increase suggests that the rises seen in 2023 are easing, and it emphasised that insurers continue to absorb increasing costs, with the average claim paid rising by 8% to a record £4,800 over the same period.
Claims inflation has yet to stabilise, with the costs of repairs, replacement vehicles and theft all rising. ABI previously attributed overall cost pressures to energy inflation and a rise in the cost of raw materials, courtesy cars, and second-hand cars.
The association noted that, over a longer period, motor insurance has closely tracked inflation with prices now 1.3%, or £8, higher than the previous peak at the end of 2017, partly due to a significant drop in prices after the pandemic.
The ABI remarked that 2023 was a "difficult year" for motor insurance margins and that since 2017 the cost for insurers to pay claims rose by 23% in real terms.
In February, ABI set out steps the industry is taking to tackle the rise in motor cover costs in a ten-point action plan. This week, the association published its ‘Premium Finance Principles’, which aim to ‘outline fair practice’ and set out its members’ commitment to managing the costs customers pay monthly for motor insurance- a move which stopped short of ABI’s previous plan to introduce a voluntary, industry-led premium cap.
ABI Director of General Insurance policy, Mervyn Skeet, said:
“We understand that car insurance costs are putting pressure on household finances. These figures show how competitive the motor market is, with insurers absorbing significant cost rises but keeping prices relatively stable.
“Even though these figures demonstrate a slowdown in price increases, we won’t be taking our foot off the gas when it comes to our work on tackling the cost of cover.”