Motor premiums reach record high after ‘dramatic’ claims costs surge

Motor premiums reached a record high as insurers battled a “dramatic” increase in claims costs, new figures have revealed.

The data, which was published by Confused.com and WTW today (13 October 2023), showed UK motorists were now paying £924 on average for premiums, some £338 more than 12 months ago.

This meant car insurance premiums reached their highest ever recorded levels since the two firms launched their Car Insurance Price Index in 2006.

And with the yearly rise in premiums currently standing at 58%, the pace of annual cost increases outstrip CPI inflation, which stood at 6.3% in August.

WTW said the rise came as insurers battled with sustained cost pressures, such as claims costs.

Tim Rourke, UK head of P&C pricing, product, claims and underwriting at WTW, said: “Drivers are seeing their car insurance premiums soar by as much as 90% as insurers battle a dramatic increase in claims costs, pushed higher by rising repair costs and labour shortages.

“As poor economic conditions bite, we are seeing claims in vehicle theft increasing alongside a rise in fraudulent claims also to blame.”

Regions

Meanwhile, all regions across the UK recorded soaring double-digit price rises in insurance premiums over the last 12 months.

Increases ranged from 50% for drivers in central and north Wales, taking their annual premiums to £613, to the largest annual percentage increase of 63% recorded in the west midlands, where those buying new policies found their premiums costing £1,139, exceeding the £1,000 mark for the first time.

Meanwhile, Manchester and Merseyside remained the most expensive area outside of the capital, where the average policy is now £1,154.

The south west of England, meanwhile, continued to be the cheapest region for car insurance, with average premiums now costing £597.

Inner London was still the most expensive region, with drivers now paying an average bill of £1,503, an annual percentage increase of 61% (£567).

Despite the rise, the Car Insurance Price Index also revealed a slowdown in premium increases through the third quarter of 2023.

While they rose by £149 in total, monthly increases for July, August and September sat at 7.5%, 6.6% and 4.1% respectively.

“The latest monthly data suggests that the cycle of this challenging market may now be peaking, signalling some relief for drivers in 2024,” Rourke added.

“If inflation continues to slow next year, with the cost of second-hand cars and repairs stabilising, this may feed through to less price pressure.”