UK Motor Premiums Start to Stabilize but Costs to Insurers Mount: ABI

Motor premiums increased by just 1% in the first quarter of 2024, indicating an easing of the price rises seen in 2023 when premiums rose by 25% from 2022, according to the Association of British Insurers.

However, insurers continue to absorb growing costs, with the average claim paid rising 8% to reach a record of £4,800 (US$ 5,997) over the same period.

The data comes from the ABI’s Motor Insurance Tracker (Q1 2024), which analyzes nearly 28 million policies sold each year and the claims paid against these policies. The tracker is based on the price customers pay for their cover rather than what they are quoted (which typically delivers higher averages).

The average comprehensive car insurance premium now sits at £635 (US$793.30), up 1% on the previous quarter (Q4 2023), said the ABI, noting that over the long-term, motor insurance has tracked very close to inflation.

In real terms, prices are just £8 (US$10) more (+1.3%) when compared to the previous peak at the end of 2017. This is partly because prices fell significantly during the pandemic, the ABI explained.

In contrast, over the same period (end 2017 to now), costs for insurers to pay claims have risen by 23% in real terms.

The ABI said that 2023 was a difficult year for motor insurance margins, with EY estimating that for every £1 collected in premiums, the industry paid out £1.14 in claims and expenses.

The latest quarter indicates claims inflation is yet to stabilize, with the cost of repair, replacement vehicles, and theft all rising.

“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,” according to Mervyn Skeet, the ABI’s director of General Insurance Policy, in a statement.

“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,” Skeet said.

Source: Association of British Insurers

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