The average motor insurance premium fell by 2% in April to June compared to the first quarter of 2024, according to the latest data from the Association of British Insurers (ABI).1
The cost of claims has had a significant and sustained impact on motor premiums, and this is the first time the quarterly average premium has fallen in two years, now standing at £622. This drop follows a 1% increase to premiums in the first quarter of this year. Pressures on claims costs also appear to have eased this quarter,2 with the average claim paid remaining stable (+0.4%) after an 8% rise in Q1.
Longer term trend
Despite the quarterly drop in premiums, on an annual basis, the Q2 2024 figure is 21% higher than the same period in 2023.
The ABI’s latest claims data shows over the last 12 months:
- In total, insurers paid out £2.9 billion in motor insurance claims – up 18% on £2.5 billion paid in Q2 2023.
- Repair costs are 28% higher, totalling £1.9 billion.
- The average cost of theft of a vehicle fell 10% to £12.1k. However, the average cost of theft from a vehicle hit a record high of £3.1k.
2023 was a difficult year for motor insurance margins, with EY estimating that for every £1 collected in premiums, the industry paid out £1.13 in claims and expenses.3 This follows a similar result in 2022 when the industry paid out £1.11 in claims and expenses for every £1 collected in premiums.
Over the long term and in real terms (accounting for inflation), the average premium paid is now £12 lower than peak prices in 2017Q4. This is a 2% drop whilst over the same period the average cost of a settled claim has risen by 21%.
Mervyn Skeet, ABI Director of General Insurance Policy, said, “After a very challenging period for insurers and customers alike, we’re encouraged to see an easing of increases to motor insurance premiums as recent claims costs stabilise. While this is good news, we need to continue our work focusing on claims costs, for the good of consumers. It remains a top priority for us and our member insurers.”
Action on motor premiums
While increases to insurance prices have started to ease, the industry understands that premiums are still putting significant pressure on household budgets. This year, ABI launched its 10-Point Roadmap, which outlines a combination of actions that industry, government or regulators could initiate or improve on to help tackle insurance costs. Such steps include making more information available to consumers, improving road safety and cutting Insurance Premium Tax.