UK car insurance costs set for further rise in 2024

Motor insurance coverage costs within the UK are set to proceed rising this 12 months and subsequent, in keeping with a brand new sector forecast, as issues develop that folks 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 12 months, and 6 per cent in 2024, earlier than flattening in 2025. Costs elevated sooner than anticipated within the first quarter.

Paul De’Ath, head of market intelligence at Oxbow Companions, mentioned there was “undoubtedly 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 huge suppliers reminiscent of Admiral and Direct Line reply to the rising worth of payouts by ratcheting up their charges.

The typical motor insurance coverage coverage within the UK was £478 within the first quarter of the 12 months, up 16 per cent year-on-year to the very best stage recorded for the reason that finish of 2019, in keeping with figures from the Affiliation of British Insurers.

Rising insurance coverage costs have fuelled issues amongst regulators and buyer teams that folks 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 during the last 12 months, we are going to doubtless see a ripple impact of consumers cancelling, modifying their protection, or choosing insurance policies with insufficient protection and excessive excesses, finally placing themselves at larger threat,” mentioned Catherine Carey, head of shopper technique at consultancy Shopper Intelligence.

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

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

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

Business information revealed final week mentioned the quantity insurers spent on car repairs had jumped by a 3rd over the previous 12 months, and rising prices have triggered revenue warnings for some insurers.

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

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

Oxbow predicts insurers will break even on their underwriting subsequent 12 months, as costs meet up with inflationary results. However, De’Ath mentioned, the “worst-case situation is inflation is rather more embedded than anticipated and people claims prices preserve rising”.

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