’Some of these actions we can do quickly, others will require time or assistance from the regulator or government,’ says director
The ABI has unveiled a new action plan to combat steep rises in motor premiums.
The 10-point roadmap is aimed at tackling insurance costs for all drivers and includes a combination of actions that the industry, government or regulators could initiate or improve.
These include the cutting of insurance premium tax (IPT) and making more data available for consumers to understand which vehicles are more expensive to insure.
This came after ABI figures showed that the average motor insurance premium paid in the UK increased by 12% between 1 October and 31 December 2023 – up from £562 a year to £627.
Price rises have been driven by claims cost inflation, with EY estimating that for every £1 paid in premiums in 2022, insurers incurred £1.11 in claims and expenses.
It now estimates that this figure rose to £1.14 in 2023.
The impact of price rises on consumers has been exacerbated by a fixed 12% rate of IPT, adding £67 to the average motor policy.
Mervyn Skeet, director of general insurance policy, said: “We know that insurance costs are putting strain on household finances, so we’ve been working hard to find solutions. Some of these actions we can do quickly, others will require time or assistance from the regulator or government.
“Regardless, we will continue to do what we can under our new strategy to help consumers access the products that are integral to financial wellbeing and play a key role in the nation’s financial resilience.”
Actions
These actions were announced in the lead up to the publication of the ABI’s wider financial inclusion strategy.
Read: Motor premium spike drives motorists to travel uninsured
Read: Motor insurance payouts reach record high in Q3 2023
Explore more motor-related content here or discover other news stories here
This aims to help consumers better understand and access insurance, protection and long-term savings products.
Members of the ABI are also committing to better explain how insurance premiums are calculated and the steps customers can take to reduce costs.
This includes more detailed explanations at renewal, but also throughout the purchasing process.
The ABI is also in discussions with the FCA and members on possible industry action on premium finance and is also considering how it can work with finance houses and brokers that are outside the ABI umbrella.
Premium Finance allows consumers to pay monthly instead of needing to pay in one go.
“Beyond the affordability of motor insurance, the ABI’s financial inclusion strategy will cover the impact of ill health on financial security and ongoing work to ensure consumers get the right advice that they need to plan their financial lives,” the ABI said.
Below is the ABI’s 10-point roadmap to tackling insurance costs:
- Help consumers make informed decisions. The industry will do more on transparency around which vehicles are more costly to insure. For example, increasing visibility of the group rating system (which rates vehicles on risk) should help consumers make more informed choices.
- Combat vehicle theft. The ABI is exploring a partnership with the police to aid in the recovery of stolen vehicles from ports. It’s also working with vehicle manufacturers, the Mayor of London’s office and the National Police Chiefs’ Council to find more ways to prevent vehicle thefts.
- Tackle fraud and uninsured driving. Continuing to crack down on fraud and uninsured driving will reduce the costs borne by law-abiding drivers for their insurance.
- Improve road safety and road infrastructure. Through campaigns, modern safety measures and road improvement.
- Support new and novice drivers. Young and inexperienced drivers pose a greater risk to themselves and other road users. The phased approach of graduated driving licenses has been proven to improve safety.
- Reduce the impact of the Personal Injury Discount Rate (PIDR). The rate for large, severe injury compensation needs a rethink, as these costs filter back to premiums.
- Continue whiplash reform. Reform principles enacted for whiplash - which set reasonable compensation amounts and controlled the cost of injury claims - should be applied to similar injuries (bruised knees, sprained ankles etc).
- Advocate for safety-focused vehicle technology. Making assisted safety features mandatory in new cars would contribute to improved road safety. Beyond assisted systems, automated vehicles could revolutionise road safety but only if legislation ensures user and system safety.
- Lower Insurance Premium Tax (IPT). IPT adds £67 to the average policy. It’s getting worse as prices rise. It punishes responsible choices.
- Support the repair sector. Work with government, vehicle manufacturers and independent mechanics to create a robust repair sector that can fix a broader array of vehicles. This will increase competition and choice for customers.
His career began in 2019, when he joined a local north London newspaper after graduating from the University of Sheffield with a first-class honours degree in journalism.
He took up the position of deputy news editor at Insurance Times in March 2023, before being promoted to his current role in May 2024.View full Profile
No comments yet