Motor premiums stabilise – but cost to insurers mounts

Motor insurers continue to absorb growing costs despite a minimal increase in premiums during the first quarter of 2024.

That was according to the ABI, which revealed that the average comprehensive car insurance premium sat at £635 between January and March 2024, up just 1% from the previous quarter.

This means that prices are now just £8 more when compared to the previous peak at the end of 2017.

However, from the end of 2017 to present, costs for insurers to pay claims have risen by 23%.

Last year was particularly difficult for motor insurance margins, with EY estimating that for every £1 collected in premiums, the industry paid out £1.14 in claims and expenses.

And the latest quarter indicated that claims inflation was yet to stabilise, with the cost of repair, replacement vehicles and theft all rising.

Figures show the average claim paid rose 8% to reach a record of £4,800 during the period.

Competition

Mervyn Skeet, the ABI’s director of general insurance policy, said the figures demonstrated that the motor market was competitive as insurers look to keep prices stable despite incurring higher costs.

The drop in premiums came after the ABI set out the steps the industry was taking to combat the rise in the cost of motor insurance at its conference in February 2024.

And last week, it also 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.

“We understand that car insurance costs are putting pressure on household finances,” Skeet said.

“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.”