Motor premiums drop in Q2 2025 despite billions of pounds spent on claims

The average cost of motor insurance dropped in Q2 2025 despite insurers paying out billions of pounds in claims during the period, new data from the ABI has revealed.

According to the trade body’s quarterly premium tracker, published today (13 August 2025), the average premium was £562 between April and June, down £60 from £622 in the same quarter of 2024.

When adjusted for inflation, the real-terms decrease amounts to an £81 drop year-on-year.

Premiums also fell by £19 (3%) compared to the first quarter of 2025. This marks the second consecutive quarterly decline, following a £40 (6%) drop in Q1 2025.

Claims costs

This came despite insurers settling 669,000 claims in Q2 2025 – 5% more than 639,000 settled in the first three months of the year.

And ABI members paid out £3.1bn in claims during the second quarter of this year,maintaining the record-breaking level of quarterly payouts first reached in Q1 2025.

Repairs continue to be a major contributor to elevated claims costs, increasing by £100m from Q1 to £2.1bn.

The high cost of claims for theft also played a role in the record payouts, as the average claim for theft of and from a vehicle increased by £319 (3%) on the previous quarter to £11,800.

Mark Shepherd, head of general insurance policy at the ABI, said: “It’s encouraging to see motor premiums have fallen for a second consecutive quarter, offering some much-needed relief to drivers.

”But with the cost of cover still weighing on household finances, we must not lose momentum in tackling the persistent pressures driving up claims. That’s why we continue to urge the government to support the industry by investing in training for the repair sector, improving road safety and holding firm against any rise in insurance premium tax in the Autumn Budget.”