Insurers need to revitalise motor premiums to tackle higher repair costs, increasing car theft and greater compensation payments, says ABI.
The Association of British Insurers (ABI) has said the pressure on motor premiums has reached such a level that price rises are also inevitable.
Speaking yesterday, Mark Shepherd, ABI’s assistant director, head of general insurance policy, warned higher repair costs, higher compensation payments and rising car theft claims were combining to force insurers into a premium rethink.
His comments came as the ABI released its latest Motor Insurance Premium Tracker on 30 October 2019. The tracker found that despite increasing cost pressures, the average price paid for motor insurance in the third quarter of the year remained flat, as drivers continue to benefit from a competitive motor insurance market.
The tracker reported the average price paid for motor insurance in Q3 of 2019 at £468, which fell marginally by £1 on the second quarter. The average premium paid fell by £3 compared to the same quarter last year.
“Motorists continue to get competitively priced motor insurance deals, but cost pressures remain,” explained Shepherd. “This summer’s discount rate change will do nothing but add to the cost pressures already being felt by insurers from more expensive vehicle repairs and theft claims.
”This makes it more important than ever that the whiplash reforms in the Civil Liability Act are implemented on time and in full. Now is also the right time to consider reducing the rate of insurance premium tax, which has doubled to 12% over the last four years.”
The tracker highlighted repair costs are continuing to rise, “reflecting ever more sophisticated vehicle design and technology, which in most cases are more expensive to repair when damaged”.
In the first half of the year, the repair bill for insurers, at £2.3bn, rose by 11% compared to the same period last year. The low value of the pound is also impacting the cost of spare parts bought overseas.
Crime was also hitting the underwriters, with the cost of theft up by 18% for the first half of the year compared to the same period of 2018 at £211m.
The numbers reflect Home Office figures that have recorded a rise in vehicle thefts over the last five years. The increase is driven, in part, by the growth in keyless car crime.
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