Average UK motor policy cost drops 7%

The average price paid by UK motorists for their motor insurance fell 7% to the lowest level in six years in 2021, according to the Association of British Insurers (ABI), though there are signs sustained cost pressures on insurers are starting to lift the cost of cover.

The ABI’s latest Motor Insurance Premium Tracker, a survey that looks at the price consumers pay for their cover, says that the average UK price paid for comprehensive motor insurance was £434 ($824) last year, down 7% annually to the lowest since 2015.

However, in the fourth quarter, the average premium paid rose by £11 ($21), highlighting that “continued cost pressures on insurers could be starting to filter through into the cost of cover,” the ABI said.

Supply chain issues are causing some delays in accessing some replacement parts, the ABI said, and with road traffic returning to pre-lockdown levels, claims are expected to rise.

“While we expect the motor insurance market to remain highly competitive in 2022, rising costs for parts, repairs and other supplies and services will continue to put pressure on premiums for motor insurance for both new and existing customers,” ABI Manager General Insurance Laura Hughes said.

Between 2015 and 2020, the average amount paid for damage to UK policyholders’ vehicles increased 59%, while the average paid to third parties for damage to their vehicles rose 32%.

The Financial Conduct Authority (FCA) has said new rules that kicked in at the start of 2022 to the pricing of motor and home insurance could lead to some consumers paying higher prices if they currently benefit from significant new business discounts.

The rules were introduced from January 1 after a review found many insurers were increasing prices for renewing customers year-on-year in a practice known as price walking. FCA says the reforms, applying to personal motor and household insurers, are expected to save consumers billions over a decade.

“While the FCA pricing rule changes may well lead to fewer introductory discounts, it should still pay to shop around,” Ms Hughes said. “Insurers … will be doing all they can to ensure competitively priced motor insurance.”