The average premium paid by customers for private motor insurance in the third quarter of this year was 2% higher than a year earlier, as vehicle repair costs increased, according to an insurance industry body.
Motorists typically paid £436 in the third quarter of 2022, which was a 3% increase compared with the second quarter of this year, the Association of British Insurers (ABI) said.
It said insurers have been finding it increasingly challenging to absorb rising costs, such as more expensive repairs and rises in used car prices.
The average cost of repairing vehicle damage under a policyholder’s own motor policy jumped by 16% to just over £3,000 in the year to the second quarter of 2022, the ABI said.
The continued shortage of semiconductor microchips and global supply chain issues have led to longer waiting times for many new vehicles and vehicle parts. This has contributed to a rise in the demand for second-hand cars, the association said.
Like many other sectors, motor insurers are facing sustained higher costs— Jonathan Fong, Association of British Insurers
This reflects increasing vehicle sophistication, leading to more expensive repairs, as well as rises in the costs of raw materials such as paint, it added.
The ABI’s tracker looks at the prices people pay for their cover, rather than quoted prices.
The Financial Conduct Authority (FCA) introduced new rules on the pricing of motor and home insurance on January 1 this year.
The rules ensure that the price paid by renewing customers is no greater than the price charged to an equivalent new customer for the equivalent policy bought through the same distribution channel, such as insurer, broker, or price comparison website.
Jonathan Fong, the ABI’s senior policy adviser, general insurance, said: “Insurers recognise that these continue to be difficult times for many households dealing with the rising cost of living.
“Like many other sectors, motor insurers are facing sustained higher costs, which are becoming increasingly challenging to absorb. Despite this, they continue to do all they can to keep motor insurance as competitively priced as possible.
“Anyone concerned about being able to continue paying their motor insurance premium should speak to their insurer about any alternative payment options that may be available.”
