The Association of British Insurers (ABI) recently released data indicating a significant surge in the cost of comprehensive motor insurance in the UK, with premiums rising by approximately one-third over the past year. In the first quarter of 2024, the average premium for car insurance reached £635, representing a notable increase of £157 compared to the same period in 2023. Despite these price hikes, there was a 1 percent increase in motor insurance premiums on a quarterly basis, indicating a slight stabilization in prices.
Despite insurers' efforts to absorb substantial cost increases and maintain relatively stable prices, the average claims paid out have continued to rise, with an 8 percent increase reported compared to the final quarter of 2023, reaching a record average of £4,800. Mervyn Skeet, Director of General Insurance Policy at the ABI, highlighted the competitive nature of the motor insurance market and emphasized the industry's commitment to addressing the rising costs while striving to keep prices stable. Notably, the analysis by professional services group EY revealed that insurers in the sector paid out £1.14 in claims and expenses for every £1 collected in premiums, underlining the challenging year for motor insurance margins.
Rocio Concha, Director of Policy and Advocacy at Which?, expressed concerns about the persistently high premiums, noting that while there has been some stabilization in prices, they still remain exorbitantly high and unaffordable for many drivers. The ABI pointed out that historically, motor insurance premiums have tracked inflation, with a marginal real-terms increase of 1.3 percent since the peak in insurance costs at the end of 2017. This marginal rise is partly attributed to a significant drop in prices during the pandemic. The ABI's data, derived from premiums paid by customers of its member companies, showed lower figures compared to other estimates from quotations, such as the Office for National Statistics reporting a 34.8 percent year-on-year increase in motor insurance quotes in the first quarter of 2024.