Average Car Insurance Hits £500 Per Year

The average cost of car insurance has risen to a record-breaking £500 per year for the typical motorist. Inflation and an increase in repair costs seem to be driving up this increase, which has raised the typical cost to the highest it has ever been.

Studies conducted have analysed 28 million insurance policies and found that the typical premium for Q2 was £511. This is a 21% increase from Q2 in 2022.

Sustained Cost Pressure

Speaking on the subject, the Association of British Insurers (ABI) has said that the new higher prices were due to “sustained cost pressures”.

The industry paid out roughly £4.2bn in claims for motor insurance. This number included vehicle repair work, theft and personal injury. All of these payments took place in Q1 2023 - a 14% increase on the year before.

Increasing costs are affecting everyone who owns a car due to the rising cost of vehicle repairs. Prices have shot up by 33% and rose to 1.5bn, which the industry feels is a reflection of energy inflation.

No Easy Way Out

One insurer quoted a 40% increase in labour costs between 2022 and now, and the costs for replacing car parts has gone up by 21%.

Any motorist renewing their cover saw average prices rise by £36 on the previous quarter, with costs reaching £471, and the price of a new policy was up by £21, increasing to £566.

It’s clear that there is a difference in cost between a new driver and one who is renewing a policy. This distinction is usually down to the risk profile a new driver will present, as is often the case for an insurance policy.

A Bad Time For Cost Increases

Another party which has given their input on the proceedings is the consumer group Which?, who said that the new high premiums have come at some of the "the worst possible time for consumers already battling cost pressures in a number of other areas".

Speaking on the subject, the group had this to say:

"Motorists may be wondering whether insurers passing on increased costs is justified at this time. The Financial Conduct Authority's new Consumer Duty will mean insurers need to be able to demonstrate the products they are selling offer fair value."

Unfortunately, anyone who has followed the motor insurance scene for the UK will know that this isn’t a deviation from the norm so much as a continuation of past trends. A report conducted in June found that 2022 was the worst year for motor insurance, and that the average motorist paid out £1.10 in costs and claims for every £1 they got back in premiums.

Nobody can comment with any real confidence as to whether or not the price of car insurance will go down, but with prices continuing to rise and inflation at a high level, it is looking increasingly likely that we will see more price rises year on year.