’The motor insurance market is witnessing unprecedented premium inflation,’ says insight manager
The UK’s motor insurance market is facing an “alarming acceleration” in premium rates, according to new research by Consumer Intelligence.
The firm’s Car Insurance Price Index, which was published today (29 June 2023), revealed that average quoted premiums surged 34% in the past year, while the last quarter witnessed a 14.3% jump.
Consumer Intelligence said this was the largest uptick since it started tracking such data in October 2013.
“Industry experts have raised concerns about the scarcity of affordable deals in the market for new business customers, impacting younger drivers the most,” it added.
The consumer insight firm’s index revealed that the under-25 demographic saw a marked increase of 28% in their insurance premiums over the past year.
Despite this being the smallest percentage increase among all age groups, the average quoted premium for under-25s was £2,145, compared to £850 for the 25 to 49 age group and £568 for the over-50s.
“The motor insurance market is witnessing unprecedented premium inflation,” said Max Thompson, insurance insight manager at Consumer Intelligence.
“The sudden vanishing of lower-priced deals particularly threatens younger drivers, who are already grappling with higher than average premiums.”
Consumer Intelligence carried out its research by comparing the prices offered to 3,600 people by all the major price comparison sites and key direct insurers.
The top five prices for each person were compared to the previous month’s top five, with these variations averaged to produce the index.
The index found Londoners and drivers from the East Midlands faced the steepest increases in quoted premiums, with rises of 39.9% and 37.8%.
”Consumer Intelligence has concerns over the potential repercussions this could have on road safety,” the firm said.
“The lack of affordable options may deter younger drivers from taking insurance, leading to an increase in the number of underinsured drivers or forcing illegal practices.”
It came as law company Ernst and Young (EY) said that should insurers make the necessary adjustments to premium prices to keep pace with the rate of inflation, the market should return to a profitable net combined ratio of 97.4% next year.
Richard Reed, head of UK general insurance at EY, warned earlier this week (26 June 2023) that ”the need for the sector to address this and rebalance its books unfortunately means that consumers will face a sharp rise in their premiums”.
“2023 will undoubtedly be tough for consumers and insurers alike, but we expect these challenges to ease once inflation falls back,” he said.