Motor insurance premiums show first drop in two years

Quarterly premiums drop by 2%

The latest data from the Association of British Insurers (ABI) reveals that the average motor insurance premium fell by 2% between April and June 2024. This decrease comes after a 1% increase in the first quarter of the year, bringing the average premium to £622. It is the first drop in quarterly premiums in two years.

Eased pressures on claims costs

The cost of claims has significantly impacted motor premiums. However, pressures on claims costs seem to have eased this quarter. The average claim paid remained stable, increasing by just 0.4% after an 8% rise in the previous quarter.

Annual premiums remain high

Despite the quarterly drop, the average premium for Q2 2024 is 21% higher than the same period in 2023. The ABI’s latest claims data highlights the following trends over the past year:

• Insurers paid out £2.9 billion in motor insurance claims, up 18% from £2.5 billion in Q2 2023.
• Repair costs increased by 28%, totaling £1.9 billion.
• The average cost of vehicle theft fell by 10% to £12.1k, while the cost of theft from a vehicle reached a record high of £3.1k.

In 2023, the motor insurance industry faced challenges, with EY estimating that for every £1 collected in premiums, £1.13 was paid out in claims and expenses. This followed a similar result in 2022, where £1.11 was paid out for every £1 collected in premiums.

In real terms, adjusting for inflation, the average premium is now £12 lower than the peak prices recorded in Q4 2017—a 2% drop—while the cost of a settled claim has risen by 21% over the same period.

ABI’s response and future actions

Mervyn Skeet, the ABI’s director of general insurance policy, commented: “After a very challenging period for insurers and customers alike, we’re encouraged to see an easing of increases to motor insurance premiums as 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.”

To address ongoing premium pressures, the ABI has introduced a 10-point roadmap. This initiative outlines actions that industry, government, and regulators could take to help reduce insurance costs. These steps include increasing consumer information, improving road safety, and reducing insurance premium tax.

Additionally, the ABI has launched premium finance principles to promote fair practices for those paying monthly for motor insurance. The organisation is also researching how social policies could assist low-income individuals in managing their insurance expenses.

Image: Canva.

Emma Cockings Emma is a content editor for Claims Media. Emma is a experienced writer with a background in client-centric personal injury for a major firm. She has attended and reported on multiple brokerage events throughout her career.