Drivers have seen the average price of motor insurance surge by just over a fifth over the past year to reach the highest levels since 2012.
The average premium paid for private comprehensive insurance in the second quarter of 2023 was £511 – up 7 per cent on the previous quarter.
In the second quarter of 2022, the average price paid was £88 less, at £423, according to the Association of British Insurers (ABI)
The ABI said ‘sustained cost pressures’ faced by insurers, such as more expensive vehicle repairs, soaring energy costs and labour rates, have pushed up prices.
In total, insurers paid out £2.4billion in all motor insurance claims – including theft, repairs, and personal injury – in the first quarter of this year. This was 14 per cent up on the same period of 2022.
Drivers have seen the average price of motor insurance surge by just over a fifth over the past year to reach the highest levels since 2012 (file image)
Within this, the cost to insurers of vehicle repairs leapt by a third (33 per cent) to reach £1.5billion, marking the highest figure since the ABI began collecting this data in 2013.
One insurer recorded a 40 per cent rise in labour rates between June 2022 and January this year, while the costs of replacement parts for many popular cars have increased by as much as a fifth over the past year, the association added.
The ABI’s analysis is based on 28million policies sold over the past year. Its latest tracker reveals that in the second quarter of this year – when 7million policies were sold – the average price paid by motorists renewing their insurance cover rose by £36 on the previous quarter to £471, while the average premium for a brand new policy was up by £21 to £566.
Financial Conduct Authority (FCA) rules on the pricing of motor and home insurance introduced last year ensure the price paid by renewing customers is no greater than that charged to an equivalent new customer for a similar policy bought through the same distribution channel.
But the rules do not set or cap the level of premium paid.
Mervyn Skeet, the ABI’s director of general insurance policy, said: ‘These continue to be tough times for many motorists and motor insurers alike. With many families facing higher cost of living bills, no-one wants to see the cost of their motor insurance rise.’
He said insurers ‘remain determined to ensure motor insurance remains as competitively priced as possible’, but that this has ‘become increasingly challenging’ given the continued rising costs they face.
Mr Skeet added: ‘We would urge anyone concerned about being able to afford their insurance to speak to their motor insurer to see what options might be available. And despite cost pressures, it can still pay to shop around to get the policy at the most competitive price.’
In total, insurers paid out £2.4billion in all motor insurance claims – including theft, repairs, and personal injury – in the first quarter of this year (file image)
Jenny Ross, editor of consumer magazine Which? Money, said premiums reaching record highs ‘comes at the worst possible time for consumers already battling cost pressures in a number of other areas’.
She added: ‘Motorists may be wondering whether insurers passing on increased costs is justified at this time. The Financial Conduct Authority’s new consumer duty will mean that insurers need to be able to demonstrate the products they are selling offer fair value.’
Ms Ross said if insurers can’t justify the prices they charge, they ‘should face action from the regulator’.
