Claims inflation drives up insurance costs for UK motorists

• The cost of car insurance has increased 12.8% in the last 12 months
• In the UK, the average motor premium now stands at £832

UK drivers are facing ever increasing motor insurance costs as a result of claims inflation. Motor premiums are now 12.8% more than they were 12 months ago, according to the latest Consumer Intelligence data.

“This claims inflation can be attributed to a rise in accident frequency due to an increase in road traffic after the pandemic lull, elevated used car prices, increased parts and labour costs, and an ongoing supply chain crisis which is resulting in more costly repairs,” says Harriet Devonald, product manager at Consumer Intelligence.

Another factor that accelerated premiums at the start of the year was the introduction of new rules by the Financial Conduct Authority to tackle the practice of “price walking” – which led to higher renewal prices despite the ban.

The average annual motor policy in the UK now stands at £832.

Long-term view

Average overall premiums have increased 27.8% since October 2013 when Consumer Intelligence first started collecting data.

Premiums today are now at similar levels to just before COVID-19 struck in early 2020, and only 5.1% off their pricing peak of September 2017.
Age differences

Age differences

Drivers aged 50-plus have seen their car insurance premiums jump an eye-watering 16.1% in the last 12 months alone.

For motorists aged 25-49, their policies have also risen steeply – with increases of 13.7% over the same period. For younger drivers aged under 25, premiums are up just 6.2%.

Nevertheless, younger drivers continue to pay the most for their car insurance – with an average annual premium costing £1,765 for the under-25s. Motorists aged 25-49 typically fork out £666 for an annual policy, while it’s just £393 for the over-50s.

Telematics

Telematics market share continues to fall slightly when compared to the overall market. Their policies made up just 26% of the five cheapest insurance quotes for a typical motorist. This is down from a record high of 30% in January 2022.

Telematics policies base your premiums on how you drive, with insurance becoming cheaper for safer drivers.

For younger drivers aged under 25, who’ve long embraced the technology as a way of keeping costs down, telematics take-up is at 63%. This falls to 20% for drivers aged 25-49, and just 8% for the over-50s.

Regional differences

Car insurance has risen by as much as 19.3% for Welsh motorists in the last 12 months. It’s a similar story in Scotland where premiums are up 18.3%.

All other UK regions recorded double-digit price rises over the same period apart from the West Midlands (9.5%) and Yorkshire and the Humber (8.8%).

Londoners (£1,375) continue to pay the most for their motor premiums, while the South West (£495) is still the cheapest UK region to buy car insurance.

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