Car insurance premiums in the UK have hit a new record as insurers battle sustained cost pressures, according to the latest Confused.com Car Insurance Price Index in association with broker WTW.
Motorists are now on average paying £924, 58% (£338) more than 12 months ago when it was £586, the index revealed.
“Car insurance premiums are at their highest ever recorded levels since the WTW/Confused.com Car Insurance Price Index was launched in 2006. The previous peak was in the second quarter of 2023 when the average premium was £776. At 58%, the annual rise in motor insurance costs continues to far outstrip CPI inflation, at 6.3% in August.” the report stated.
According to the index, car insurance costs have now increased for eight straight quarters following a price rise of 19% (£149) in the third quarter of 2023.
Based on price data compiled from over six million customer quotes per quarter, this is the largest quarterly increase on record, WTW highlighted. The previous fastest rise has also been set in the second quarter of 2023 (18%).
Tim Rourke, UK Head of P&C Pricing, Product, Claims and Underwriting at WTW, said: “Drivers are seeing their car insurance premiums soar by as much as 90% as insurers battle a dramatic increase in claims costs, pushed higher by rising repair costs and labour shortages. As poor economic conditions bite, we are seeing claims in vehicle theft increasing alongside a rise in fraudulent claims also to blame.”
All regions across the UK recorded soaring double-digit price rises in insurance premiums over the last 12 months. The largest annual percentage increase was 63%, in the West Midlands, where those buying new policies found their premiums costing £1139, exceeding the £1000 mark for the first time.
Drivers in Central and North Wales saw their premiums increase 50%. While Manchester / Merseyside remains the most expensive area outside of the capital, where the average policy is now £1154, following a £417 (57%) annual increase.
The South West of England continues to be the cheapest region for car insurance, with average premiums now costing £597. Inner London is still the most expensive region, with drivers now paying an average bill of £1503, which is an annual percentage increase of 61% (£567).
Steve Dukes, CEO at Confused.com, commented: “For a second consecutive quarter, premiums have increased so rapidly that we’re seeing the highest prices recorded across all areas of the UK. That’s because insurers are having to deal with a lot right now, such as an increase in claims and having to price for more expensive cars on the road – such as electric vehicles.
“As these adjustments happen, there will come a point where we see price growth settle. But when we look at how prices are affecting drivers right now, insurers need to be doing more to keep prices affordable. Otherwise there’s a real risk that a large number of drivers could be priced off the road as motoring costs become unaffordable.”
The index also revealed that drivers between 17 and 20 years old took the largest hit of any age group. Those aged 18 saw the sharpest annual rise as prices jumped by £1414 (89%) compared to a year ago and now on average paying £2995.
“Despite the record-breaking hikes in car insurance premiums seen in 2023, a more granular breakdown of the latest data from the WTW/Confused.com Index reveals a slowdown in the premium increases through the third quarter, with monthly increases for July, August and September at 7.5%, 6.6% and 4.1% respectively,” the report noted.
Rourke concluded: “The latest monthly data suggests that the cycle of this challenging market may now be peaking, signalling some relief for drivers in 2024. If inflation continues to slow next year, with the cost of second-hand cars and repairs stabilising, this may feed through to less price pressure.”
