Motor premiums stabilise but cost to insurers mount

Motor premiums increased by just 1% in the first quarter of 2024, indicating an easing of rises seen in 2023.¹ However, insurers continue to absorb growing costs, with the average claim paid rising 8% to reach a record of £4,800 over the same period.²

The data comes from the Association of British Insurers (ABI) Motor Insurance Tracker (Q1'24). The tracker is the most comprehensive in the UK, analysing nearly 28 million policies sold a year and the claims paid against these policies. It's also the only collection that is based on the price customers pay for their cover rather than what they are quoted (which typically delivers higher averages³).

The average comprehensive car insurance premium now sits at £635, up 1% on the previous quarter (Q4'23). Over the long-term, motor insurance has tracked very close to inflation. In real terms, prices are just £8 more (+1.3%) when compared to the previous 'peak' at the end of 2017. This is partly because prices fell significantly during the pandemic.

In contrast, over the same period (end 2017 to now), costs for insurers to pay claims have risen by 23% in real terms. 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 stabilise, with the cost of repair, replacement vehicles, and theft all rising.

Mervyn Skeet, the ABI's Director of General Insurance Policy, 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."

The ABI set out the steps the industry is taking to combat the rise in the cost of motor insurance at its conference in February. Just last week it announced that its members had agreed a set of principles on premium finance, aimed at managing the cost associated with paying for insurance on a monthly basis.

The ABI recommends that anyone struggling with the cost of their cover speaks to their insurer.

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Notes for Editors:

Footnotes

1. Premiums rose by 25% in 2023 (vs 2022).

2. The average claim datapoint has been collected since Q1 2013.

3. Data from price comparison site indices produce higher averages than our actual price paid data because they are typically based on an average of multiple quotes and comparison sites attract a cross section of drivers not typical of the wider UK average. More on this on our blog.

Enquiries to:

Helen Mitchell	020 7216 7411	Mobile: 07834 328512
Heidi Pullig	020 7216 7340	Mobile: 07595 106221
Chris Blackwood	020 7216 7340 020	Mobile: 07595 106788

The ABI is the voice of the UK's world-leading insurance and long-term savings industry, which is the largest sector in Europe and the third largest in the world. We represent more than 300 firms within our membership, including most household names and specialist providers, providing peace of mind to customers across the UK.

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