Regaining equilibrium shows insurers are acting on the FCA’s new pricing rules, says pricing expert
Price equilibrium is returning to the car insurance market after new price walking rules pushed premiums up by 4.9% in January 2022, according to market research firm Consumer Intelligence.
Premiums are now 4.3% higher than at start of the year, after prices in the motor market levelled-off in February.
The FCA’s new rules on price walking came into force on 1 January 2022, with the majority of the premium price increase coming throughout the first month of the year.
An average motor policy in the UK is currently priced at £697, according to Consumer Intelligence.
Equilibrium price is the point at which supply and demand are equal.
Not subscribed? Become a subscriber and access our premium content
Considering how prices are stabilising, Consumer Intelligence pricing expert Harriet Devonald said: “It shows that most insurers made a one-off step change to new business premiums to ensure they [were] compliant with the new pricing rules.
“It does, however, appear that some providers either over or undershot in their expectations of market-level inflation and have made adjustments subsequent to their initial pricing changes.
“We expect motor insurance pricing to regain its equilibrium over the coming months.
“Over the longer-term, we anticipate general inflation in prices in 2022, with underlying pricing pressures remaining broadly upward.”
Age and region
The analysis, which reviewed average insurance premium movements across the four biggest price comparison websites as well as key direct insurers, further showed that in the last three months average premiums have risen 6.2% for over-50s, with motorists aged 25 to 49 also seeing an increase of 4.1%. Drivers’ under-25, however, recorded price falls of 2.3%.
Around 30% of the five cheapest insurance quotes now come from telematics firms, compared to 28% earlier this year.
Regionally, the South West (6.6%) and Wales (6.2%) experienced the biggest premium increases in the last three months.
Despite London seeing the smallest uptick (0.8%), Londoners (£1,216) continue to pay the most for their annual car insurance, followed by the West Midlands (£876).
Scotland (£416) is now the cheapest UK region to buy car insurance.