Motor insurance premiums have increased by a fifth in the past year

Motor insurance premiums have increased by over a fifth in the past year, despite a 2% dip in average prices in the second quarter of this year.

The average cost of car cover fell to £622 from a record high of £635 in the previous quarter, but remained 21% higher than the same period last year. The Association of British Insurers (ABI) has attributed the increase in premiums to rising claims costs, including higher prices for spare parts and second-hand cars, as well as supply chain issues in repair shops. The ABI’s latest data shows that repair costs have risen by 28% over the past year.

Over the long term and in real terms (accounting for inflation), the average premium paid is now £12 lower than peak prices in 2017 in Q4.  This is a 2% drop whilst over the same period the average cost of a settled claim has risen by 21%.

Mervyn Skeet, ABI Director of General Insurance Policy, said “After a very challenging period for insurers and customers alike, we’re encouraged to see an easing of increases to motor insurance premiums as recent claims costs stabilise. While this is good news, we need to continue our work focusing on claims costs, for the good of consumers. It remains a top priority for us and our member insurers.” 

Tom Banks, Motoring Expert at Go.Compare car insurance said “The average cost of comprehensive car insurance is now £622, falling 2% between April and June compared to the first quarter of 2024. Repair costs remain high – over the last 12 months, they are 28% higher than the 12 months prior, totalling £1.9 billion for the industry.

“It’s great news that the ABI’s latest figures show car insurance costs are coming down. This is going to be really welcome news for customers – and our own price index for car insurance showed that the average cost of premiums fell £18 between Q4 of 2023 and Q1 of 2024.

“At the same time, though, the Go.Compare car insurance index revealed that while costs were falling, the average policy is still £100 more than it was a year before, meaning that car insurance is still a significant cost for motorists and continues to add pressure while we are in a cost-of-living crisis. This means that it’s just as important for policyholders to make sure that they are getting the best deal on their policy.

“We recently published research that revealed that around 4 million motorists (almost 10 per cent) are letting their annual premiums automatically renew without shopping around, potentially missing out on significant savings.** If you are one of these motorists and feel like there is little you can do to change the cost of your policy, comparing the options available to you is a great place to start saving. It’s important to remember that there is a wide range of factors that insurers will take into consideration when calculating the cost of your premium so there are a few simple changes you can make when looking around.