’2023 will undoubtedly be tough for consumers and insurers alike,’ says head of UK general insurance 

Exactly 90% of motorists worry about the rising costs of motor insurance either “regularly, or some of the time,” according to new research.

Gap insurance provider ALA Insurance’s 2023 Money Survey, published today (7 September 2023), noted that 88% of those surveyed disclosed that they experienced varying degrees of worry about the escalating cost of car insurance.

This news follows after the average price of motor insurance hit a record high in Q2 2023 as insurers battled with “sustained cost pressures”, according to analysis by the ABI.

The ABI’s Motor Insurance Premium Tracker for Q2 2023 revealed that the average premium paid for private comprehensive motor insurance surged 21% year-on-year to £511, the highest level since records started in 2012.

ALA Insurance’s research, which surveyed 2,000 UK adults earlier in the summer, found that 88% of surveyed respondents experienced varying degrees of worry over rising motor insurance premiums, with this figure much higher in lower income households. 

Over a quarter of respondents in households earning less than £10,000 per year reported that they worried about the cost of car insurance all of the time. 

Cost pressures

Cost remained the leading reason to cancel all types of insurance policies among those ALA surveyed, as its research found that two fifths of UK residents had cancelled a policy due to cost.

Additionally, the data revealed that 10% of surveyed motorists did not feel comfortable with their current level of motor insurance. This worry was more pronounced in younger groups, with one in five of those aged under 34 not feeling comfortable with their current coverage level. 

Encouragingly however, the research found that 90% of respondents felt insurance was important, while 40% ranked insurance in their top two or three financial priorities overall.

While rate increases are necessary to combat inflation for motor insurers, consultancy firm Ernst and Young (EY) said that, were motor insurers to make the necessary adjustments to premium prices and keep pace with the rate of inflation, the market should return to a profitable net combined ratio of 97.4% next year.

Richard Reed, head of UK general insurance at EY, warned earlier this year (26 June 2023) that ”the need for the sector to address this and rebalance its books unfortunately means that consumers will face a sharp rise in their premiums”.

“2023 will undoubtedly be tough for consumers and insurers alike, but we expect these challenges to ease once inflation falls back,” he said.