Yahoo Finance Drivers paying out £150 more in car insurance than a year ago, data shows
Drivers are paying £150 more on car insurance than a year ago after the price of premiums jumped by a third, industry data shows.
Data published by the Association of British Insurers (ABI) showed the typical policy in the first three months of 2024 was £635, compared to £478 during the same period last year.
Premiums shot up in 2023 as insurers battled the soaring cost of vehicle repair, replacement and theft. Prices quoted to most drivers renewing or changing their insurance are commonly between £500 and £749, according to market research firm Consumer Intelligence.
Three years ago, the City watchdog set new rules to stop insurers from “price walking” – the practice of steadily increasing the premiums paid by the millions of people who never switch providers. However, some have still reported seeing increases in insurance premiums doubling in a year.
The ABI said that despite record-high premiums, “motor insurance has tracked very close to inflation”, with prices just £8 more expensive in real terms compared to their previous peak at the end of 2017.
By contrast, it said, costs for insurers had risen by 23pc in real terms in the same period.
The accountancy firm EY estimates that for every £1 collected in premiums, the industry paid out £1.14 in claims and expenses.
Mervyn Skeet, of the ABI, said: “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.
“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.”
The average cost of an insurance claim rose by 8pc to £4,800 in the first quarter, but the ABI said that insurers were continuing to absorb the growing cost of repairs.
It added that premiums had only risen by 1pc since the last three months of 2023, suggesting an easing in price increases.
But Rocio Cooncha, of consumer group Which?, said drivers who cannot afford to pay their premiums in one go would be stung by interest of up to 40pc on monthly payments, potentially adding hundreds of pounds to the final bill.
She said: “The regulator needs to get a grip on the issue quickly by making clear that insurers squeezing customers paying monthly with excessive interest rates to make higher profit margins than those paying annually does not meet fair value requirements, and setting deadlines for firms to fix this.”
