Average motor insurance premium paid falls to £416

The average price paid for motor insurance in Q1 2022 fell by 5% to its lowest level in nearly seven years, according to the Association of British Insurers (ABI).

The ABI’s latest Motor Insurance Premium Tracker revealed that the average price paid for comprehensive motor insurance was £416 in Q1 2022, a 5% drop over the previous 12 months. This fall means that consumers are paying the lowest average premium since Q3 2015.

Motor insurance premiums are falling as first indications suggest that the initial impact of the Financial Conduct Authority’s (FCA) changes to pricing rules introduced on 1 January 2022 was an increase in the difference between new and renewed average premiums paid.

The average premium paid for a new policy in Q1 was £105 higher than for renewals, according to the ABI. 

The average premium for new policies was £480, up £34, on the same quarter in 2021, while the average for renewed policies, at £375, fell by £55.

While the introduction in 2021 of The Civil Liability Act has helped to tackle the high number and cost of whiplash claims, the continued global shortage of semiconductors, rising used car prices, more expensive repairs and a shortage of skilled labour in the vehicle repair sector are leading to higher costs for motor insurers.

James Dalton, director of general insurance policy at the ABI, commented: “Like other sectors, motor insurers face rising costs. While it is going to be extremely challenging for these to be absorbed, insurers are doing all they can to keep prices as competitive as possible as millions of household cope with the cost of living crisis.” 

Dalton added: “As the FCA has said, the impact of their reforms to pricing rules introduced on 1 January this year could lead to some consumers paying higher prices if they used to benefit from significant new business discounts. For some it could still pay to shop around for the policy that best meets their needs.”

Image: Canva

Mark Dugdale