The average price paid by motorists for their motor insurance in the second quarter of this year rose slightly on the previous quarter to £419, according to the ABI's latest Motor Insurance Premium Tracker. For some time, the ABI has warned that insurers are finding it increasingly challenging to absorb rising cost pressures, such as higher second-hand car prices and more expensive vehicle repairs.
The ABI's Tracker is the only survey that looks at the price consumers pay for their cover, rather than the price they are quoted.
The latest Tracker shows that in the second quarter of 2022:
- The average premium paid for private motor insurance at £419 rose by £5 (1.3%) on the previous quarter. However, this is still £11 lower than the same quarter in 2021.
- While still too early to fully assess the impact of the Financial Conduct Authority's changes to the rules on the pricing of motor and home insurance introduced on 1 January 2022, indications show an increase in the difference between new and renewed average premiums paid. The average premium paid for a new policy in the second quarter was £129 higher than for a renewed policy. Average premiums for new policies increased by 3% to £500 and average premiums for renewed policies increased by 0.5% to £371.
As the FCA said when the changes were introduced, the impact of their reforms to pricing rules could lead to some consumers paying higher prices if they previously benefited from significant new business discounts.
As motor insurers have been implementing the FCA pricing rule changes, they have continued to deal with rising costs, and supply chain issues, including:
- The continued global shortage of semiconductors made worse by the fallout from the Covid pandemic and the Russian invasion of Ukraine. The average car can contain up to 3,000 semiconductor chips, and their shortage impacts on vehicle repair times.
- Rising used car prices reflecting, in part, longer new car delivery times. Average used car prices rose by 30% in the last year (source: Auto Trader)
- More expensive repairs, coupled with rises in the costs of raw materials such as paint, as increasingly sophisticated vehicles are more costly to repair.
- A shortage of skilled labour in the vehicle repair sector.
- Delays in getting some spare parts are in some cases increasing vehicle repair times.
Callum Tanner, the ABI's manager, general insurance, said:
"Insurers appreciate that these are difficult times for many households dealing with the rising cost of living. While, like many other sectors, motor insurers are facing higher cost pressures of their own, which are becoming increasingly challenging to absorb, they will continue to do all they can to keep motor insurance as competitively priced as possible."