Amidst the introduction of a new UK driving reform, recent analysis highlights a concerning trend: the average cost of car insurance in the UK has surged by one-third within a year. Standard prices for comprehensive motor insurance now sit nearly £157 higher than they were just a year ago.
The New UK Driving Reform Impact: Car Insurance Costs Rise Despite Market Competition
According to the ABI, the average price paid during the first quarter of this year was £635, pointing out to a 1% hike from the preceding quarter. In the first quarter of last year, the average premium paid for private, comprehensive car insurance was £478.
Premiums skyrocketed in 2023 as insurers battled rising costs for vehicle maintenance, replacement, and theft. According to market research firm Consumer Intelligence, most drivers who renew or change their insurance are offered prices ranging from £500 to £749.
Three years ago, the City watchdog imposed new restrictions to prevent insurers from 'price walking'—the practice of progressively increasing rates paid by millions of individuals who never switch carriers.
The ABI stated that, despite record high premiums, “motor insurance has tracked very close to inflation,” with costs just £8 more in real terms than their previous peak at the end of 2017.
By contrast, it stated that prices for insurers had surged by 23% in real terms at the same moment.
Mervyn Skeet, the ABI’s director of general insurance policy, stated: “We understand 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.”
Insights on UK Car Insurance: Regulations, Costs, and Consumer Concerns
A car insurance is necessary to drive in the UK. Third-party insurance is the lawful minimum. This means that you are covered in case of an accident that causes injuries or damages to another individual. It, however, does not cover any other charges, including costs related to repairing your vehicle.
“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.” Earlier in April, the Treasury select committee member Dame Angela Eagle told a hearing on insurance: “My constituents and many people who write to the committee feel that insurance is becoming more of a rip-off.
“Because the price is going up, it’s harder to make a claim; people, when they do make a claim, often have to wait a very long time or aren’t dealt with very fairly. And that’s particularly the case for insurance that’s compulsory, such as driving insurance,” Skeet continued.
Charlotte Clark, the ABI’s director of regulation, stated the price hikes were because “it’s coming off the back of the pandemic, where motor insurance in particular was reduced quite significantly, because the risks of being in a car accident when you’re at home are quite low.”
Matt Brewis, the director of insurance at the Financial Conduct Authority, said the regulator was meeting with price comparison websites, brokers, and consumers “to understand the concerns of consumers and where they are seeing issues.”