ABI issues government plea as motor prices hit new record high in Q3 2023

The ABI has called for insurance premium tax to be reduced as the price of motor cover hit a new record high in Q3 2023.

Figures published by the association today (8 November 2023) revealed that the average premium paid for cover between July and September rose to £561, up 9% from the previous record of £511 in Q2 2023.

This was also an increase of 29% compared to the same time last year, according to the ABI.

To help reduce prices for drivers, the ABI called for insurance premium tax to be reduced from 12% in the Chancellor’s Autumn statement later this month.

It said the move could save drivers up to £60 on the average premium.

“The government could help drivers with an immediate reduction in costs by reducing insurance premium tax,” Mervyn Skeet, ABI director of general insurance policy, said.

“If your insurance is coming up for renewal, we would always recommend shopping around and find the best policy for you.

“But be sure to choose a policy that meets your needs, not just based on price. If you’re struggling to pay your premium, speak to your insurer who may be able to help.”

Insurer pressures

The rise in premiums came as insurers continued to experience inflationary pressures as well as delays in their repair and supply chains, with the cost of parts and materials going up as a result.

For example, insurers have reported that the cost of paint increased 16% and spare parts are up 11% from Q3 2022 to Q3 2023.

And other costs, largely driven by the price of energy, are up 46%.

“All of these have had an impact on the cost of claims, which has pushed up premiums,” the association said.

Skeet added: “We appreciate that another quarter of increased motor insurance premiums will be concerning for households who are already grappling with rising costs in other areas.

“Insurers continue to do all they can to keep motor insurance as competitively priced as possible, despite facing substantial increases in costs outside of their control.”