Yahoo Finance Car insurance cost rises 2% to £436 on average
Motorists are paying more for insurance as the average premium paid hit £436 in the third quarter of this year — 2% higher than a year earlier.
The Association of British Insurers (ABI) said insurers have been finding it increasingly challenging to absorb rising costs, such as more expensive repairs and rises in used car prices.
The average £436 premium paid by drivers in the third quarter of 2022 was a 3% increase compared with the second quarter of this year.
“Insurers recognise that these continue to be difficult times for many households dealing with the rising cost of living. Like many other sectors, motor insurers are facing sustained higher costs, which are becoming increasingly challenging to absorb,” Jonathan Fong, ABI’s senior policy adviser for general insurance, said. “Despite this, they continue to do all they can to keep motor insurance as competitively priced as possible.”
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The average cost of repairing vehicle damage under a policyholder’s own motor policy jumped by 16% to just over £3,000 in the year to the second quarter of 2022.
The continued shortage of semiconductor microchips and global supply chain issues have led to longer waiting times for many new vehicles and vehicle parts. This has contributed to a rise in the demand for second-hand cars, the association said.
This reflects increasing vehicle sophistication, leading to more expensive repairs, as well as rises in the costs of raw materials such as paint, it added.
Insurance firms have also been warned not to undervalue cars when settling insurance claims by the Financial Conduct Authority (FCA).
The FCA said some consumers who have had their cars written off after an accident were offered a price lower than the vehicle’s fair market value.
In some cases, claims staff were only increasing that offer to the fair market price when a consumer complained.
Offering a price lower than fair market value is not allowed under FCA rules. The FCA said it is acting against those firms that it has found breaking its rules.
“When making an insurance claim, people shouldn’t need to question whether they are being offered the right amount for their written off car or other goods that they need to replace,” Sheldon Mills, executive director of consumers and competition at the FCA, said.
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“Insurance firms should offer settlements at the fair market value. This is especially important now as people struggling with the cost of living will be hit in the pocket at precisely the time they can ill afford it.
“We are watching the behaviour of firms closely and will act quickly to stop firms and prevent harm to consumers where we see it.”
The financial watchdog introduced new rules on the pricing of motor and home insurance on 1 January this year.
The rules ensure that the price paid by renewing customers is no greater than the price charged to an equivalent new customer for the equivalent policy bought through the same distribution channel, such as insurer, broker, or price comparison website.
