UK car insurance costs set for further rise in 2024

Motor insurance coverage costs within the UK are set to proceed rising this yr and subsequent, in response to a brand new sector forecast, as considerations develop that individuals may very well be compelled to chop again on what’s a key monetary security internet.

Consultancy Oxbow Companions mentioned it anticipated the price of motor insurance coverage to rise 14 per cent general this yr, and 6 per cent in 2024, earlier than flattening in 2025. Costs elevated quicker than anticipated within the first quarter.

Paul De’Ath, head of market intelligence at Oxbow Companions, mentioned there was “positively some momentum nonetheless” within the insurance coverage pricing upswing, pushed by inflation in claims prices.

The price of insuring a automotive is already growing at its quickest price in a decade, as massive suppliers comparable to Admiral and Direct Line reply to the rising worth of payouts by ratcheting up their charges.

The common motor insurance coverage coverage within the UK was £478 within the first quarter of the yr, up 16 per cent year-on-year to the best stage recorded for the reason that finish of 2019, in response to figures from the Affiliation of British Insurers.

Rising insurance coverage costs have fuelled considerations amongst regulators and buyer teams that individuals will cancel their insurance coverage cowl to save cash as the price of dwelling disaster drags on.

“If motor insurance coverage premiums proceed to rise on the price we’ve seen over the past 12 months, we’ll possible see a ripple impact of shoppers cancelling, modifying their protection, or choosing insurance policies with insufficient protection and excessive excesses, in the end placing themselves at better threat,” mentioned Catherine Carey, head of client technique at consultancy Client Intelligence.

Motor insurance coverage costs have been rebounding since a current low in the course of the Covid pandemic when roads have been silent and accident charges dropped. However the rising value of automotive elements, labour and different bills for insurers have since eroded insurers’ margins and compelled them to push costs but greater. 

On the Home of Commons’ Treasury committee final week, insurance coverage executives denied that they have been making extreme income, provided that insurance coverage costs are rising quicker than broader headline inflation, which ran at 8.7 per cent in April.

“We aren’t profiteering, we’re catching up with the very excessive inflation [in claims costs],” mentioned Cristina Nestares, Admiral’s UK chief government.

Trade information revealed final week mentioned the quantity insurers spent on automobile repairs had jumped by a 3rd over the previous yr, and rising prices have triggered revenue warnings for some insurers.

Labour MP Dame Angela Eagle highlighted FCA information exhibiting that some areas of insurance coverage have very low payout ratios, a measure of claims as a proportion of premiums. “Certainly you possibly can put the worth down a bit,” she informed business representatives.

A separate current index, from comparability platform and dealer Willis Towers Watson, confirmed that quoted motor insurance coverage costs have been rising on the quickest price in a decade. It highlighted inside London, the place common insurance coverage premiums value greater than £1,000. 

Oxbow predicts insurers will break even on their underwriting subsequent yr, as costs meet up with inflationary results. However, De’Ath mentioned, the “worst-case state of affairs is inflation is far more embedded than anticipated and people claims prices hold rising”.

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