Car insurance prices up 33% in a year – but hikes are stabilising

Richard Aucock, Contributor
Wed, 01 May 2024

Car insurance prices increased 33% in the first quarter of 2024 compared to a year ago. Those who are renewing now are paying an average of £157 more than they were in 2023.

However, narrow the timeframe to a quarter-on-quarter comparison and there are signs car insurance price rises are beginning to stabilise, with premiums increasing just 1%.

The data is from the Association of British Insurers (ABI) Motor Insurance Tracker. This is considered the most robust analysis of car insurance prices in the UK, collecting data on nearly 28 million policies sold each year.

The ABI says it is the only analysis based on the prices customers actually pay for their car insurance, rather than what they are quoted – which typically deliver higher averages.

The average fully comprehensive car insurance premium now costs £635.

Interestingly, the ABI adds that the price has tracked close to inflation, rather than outpacing it – in real terms, car insurance is just £8 more that when compared to the previous peak at the end of 2017. This is because car insurance prices fell during the pandemic.

Car insurers themselves are actually absorbing higher costs, insists the ABI. The average claim paid out rose 8% in the previous quarter, to a record £4800.

Since 2017, the ABI says car insurer costs have risen 23% and, last year, for every £1 collected in premiums, they paid out £1.14 in claims and expenses.

ABI director of general insurance policy Mervyn Skeet said the organisation "understands that car insurance costs are putting pressure on household finances."

"These figures show how competitive the motor market is, with insurers absorbing significant cost rises but keeping prices relatively stable," he adds.

In other positive news for car insurance premiums, the ABI has vowed to take action on the cost of pay-monthly car insurance.

The new ‘Premium Finance Principles’ aim to underline what fair practice should look like, based around five elements – transparency, affordability, fair value, proportionality and accountability.

The organisation aims to produce a report by summer 2025 on the impact of these principles on car insurance premium finance for customers.

Mervyn Skeet said the organisation knows the cost of motor insurance is putting pressure on households, especially those on lower incomes.

"We are doing all that we can within our reach as a trade body for insurers and hope that other organisations involved with premium finance follow our lead."

He also added a call for the Government to reduce insurance premium tax (IPT), "especially when they are bringing in record revenues as a result of higher prices."

Ask HJ

My car was damaged in an accident - can I choose where it is repaired?

My car was damaged by a person who admits responsibility and wishes to pay for the repairs by claiming on his insurance. The insurer wants to have the repair carried out by an organisation with whom they must have a trading association. I do not know this organisation and how they will carry out the repair. I suspect the repair will be carried out at least cost and perhaps be of a quality less than I would like. The repair organisation say they carry out quality work and offer a three year guarantee. Do I have to accept the insurers repair organisation? I have had a quote from a local car repair company who have previously carried out excellent quality work and I would prefer to use them now.

There are thousands of garages across the UK who can help repair your vehicle in the event of a claim. With so many to pick from, insurer’s generally have an approved list of garages which are their go-to in the event of a claim. But you’re also within your legal right to choose your own garage to carry out repair works. So don’t worry about letting the insurer know that you have your own garage ready to help.

Answered by Louise Thomas

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