The average cost of motor insurance in the UK has spiked, with drivers facing a significant increase in premiums. The rise is linked to heightened repair costs and taxes, prompting calls for fair pricing and financial support measures.
The Association of British Insurers (ABI) reported that in the last quarter of 2023, the average price for motor insurance in the UK rose by £157 from the previous year, reaching a total of £627. This increase was attributed to higher costs faced by insurers, which include lengthier repair times, increased cost of repairs, and higher prices for replacement vehicles.
Mervyn Skeet, the ABI’s director of general insurance policy, suggested that the complexity of factors influencing price escalations meant no single measure could effectively lower premiums immediately. He highlighted that around £67 of the average motor premium was due to insurance premium tax, implying that a reduction in this tax could offer consumers some direct financial relief.
Consumer group Which? found that motorists opting to pay their annual insurance policy in monthly instalments end up paying an average of £309 more over the course of a year than if paying the amount in full. Younger drivers, who typically have higher premiums, are more likely to choose monthly payments.
The Financial Conduct Authority (FCA) has reminded insurance firms to ensure their products are fair valued and suggested that firms should aid customers experiencing financial difficulty, especially those with lower financial resilience.
Industry bodies, such as specialist brokers and the British Insurance Brokers’ Association, may provide assistance to those facing challenges in acquiring insurance. In the face of rising motor insurance premiums, insurance providers and regulators are focused on identifying strategies to reduce the financial pressure on consumers.
