’Significant price drops may not materialise until insurers feel more at ease in the changed environment,’ says director

Motor and home insurance prices rose at an “unprecedented” rate in the last year after surging during the third quarter of 2023, new figures have revealed.

According to pricing specialist Pearson Ham, motor insurance prices rose by 16% in Q3 2023, resulting in premiums now being almost 46% higher than last year.

And combined buildings and contents home insurance premiums increased by 33% compared to 2022, accelerated by a 10% increase in prices during July, August and September this year.

“A surge of 46% in motor insurance pricing and 33% for combined buildings and home insurance in the last year has been unprecedented,” Stephen Kennedy, director of insurance pricing at Pearson Ham, said.

Figure breakdown

These figures were revealed in Perason Ham’s latest Quarterly Insurance Price Index, which was revealed earlier this week (4 October 2023).

In regards to motor, the index found that motorists were quoted an average insurance price of £531 in September, with the highest increase seen for an individual driver within the analysis standing at 82%. 

Meanwhile, for home insurance the highest individual increase seen within the analysis was 96% compared to 12 months ago. 

Pearson Ham said that most of the premium inflation – 19% of the total 33% – seen in the last year for combined home insurance took place in the last six months.

Pressures easing?

However, for both home and motor, the firm said there had been signals to suggest that inflationary pressures were easing.

And the Bank of England is forecasting that inflation will fall to 5% by the end of the year, before continuing to fall over the course of 2024 and finally hitting its long-term target of 2% sometime in the first half of 2025.

”We anticipate that the current trend of price increases will likely stabilise in the upcoming year, reflective of the evolving competitive landscape,” Kennedy added.

“While it’s customary for average premiums to experience seasonal reductions in the new year, significant price drops may not materialise until insurers feel more at ease in the changed environment.

”For the first half of 2024, we can expect a period of relative stability, with the potential for heightened competition contingent upon any shifts in costs.

“It appears that we have reached the peak of the pricing cycle, a phase inevitably succeeded by a decline in motor and home insurance pricing. The only question remains when will this transition occur.”