The cost of comprehensive car insurance in Britain has risen by a third in the past year, putting extra pressure on household finances, recent data from the Association of British Insurers (ABI) shows.
In the first quarter of the year, the average car insurance premium was £635, a notable increase of £157 from the average of £478 in the same period of 2023.
Despite this strong increase, the ABI noted a stabilization of prices, with car premiums increasing by only 1 percent on a quarterly basis.
For many households, car insurance is the third largest expense item, after energy and municipal taxes.
Despite efforts to stabilize premiums, average claims have continued to rise, by 8 percent compared to the last quarter of 2023. The average claim paid out by insurers has now reached a record £4,800.
Mervyn Skeet, general insurance director at the ABI, highlighted the competitive nature of the motor insurance market and highlighted insurers' efforts to absorb significant cost increases while aiming for relatively stable prices.
Skeet said: “We understand that the cost of car insurance is putting pressure on household finances. These figures show how competitive the car market is, with insurers absorbing significant cost increases but keeping prices relatively stable. While these figures show a slowdown in price increases, we will not take our foot off the accelerator when it comes to our work to address coverage costs.”
The ABI highlighted a challenging year for motor insurance margins, with an analysis by professional services group EY estimating that insurers in the sector paid out £1.14 in claims and costs for every £1 collected in premiums.
Rocio Concha, director of policy and advocacy at Which?, expressed concern about the continued high premiums, saying: “While it is encouraging to see the price of premiums remaining stable, they still remain eye-wateringly high and unaffordable for many drivers. ”
The ABI noted that motor insurance premiums have historically tracked inflation, with premiums increasing by 1.3 percent in real terms since the peak in insurance costs in late 2017. The marginal increase in real premiums is partly attributed to a significant price drop during the pandemic.
The ABI's figures, based on premiums paid by customers of its member companies, were relatively lower than other estimates derived from quotes. The Office for National Statistics reported a 34.8 percent year-on-year increase in car insurance quotes in the first quarter of 2024.
