Motor insurance price falls to lowest level since 2015
The average price for new policies has increased but renewals have decreased after an insurance shake-up earlier this year.
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Your support makes all the difference.The amount paid by motorists for insurance fell to its lowest level in more than six years in the first quarter of 2022, according to the Association of British Insurers (ABI).
Prices for new policies have increased but renewals have decreased after an insurance shake-up earlier this year.
The average price paid for comprehensive motor insurance in the first quarter of the year was £416.
This was a 5% drop over the year compared with the first quarter of 2021.
The latest average premium is the lowest since the third quarter of 2015, the ABI said.
Insurers are doing all they can to keep prices as competitive as possible as millions of household cope with the cost-of-living crisis
Its tracker looks at the prices consumers pay for their cover rather than the prices they are quoted.
A shake-up of insurance pricing at the start of the year ended a “loyalty premium” paid by customers.
New rules mean motor and home insurers are required to offer renewing customers a price that is no higher than they would pay as a new customer.
The Financial Conduct Authority (FCA) introduced the measures, saying they were likely to bring an end to unsustainably low-priced deals to some customers.
Officials said people would save £4.2 billion collectively over 10 years.
The ABI said initial indications show a widening gap in the difference between new and renewed average premiums.
The average premium paid for a new policy in the first quarter was £105 higher than for renewals.
The average for new policies was £480, up by £34 on the same quarter in 2021, while the average for renewed policies was £375, down by £55.
The ABI said that while the introduction in 2021 of the Civil Liability Act has helped to tackle the high number and cost of whiplash claims, cost pressures on premiums continue.
These include the continued global shortage of semiconductors made worse by the Covid-19 pandemic and the war in Ukraine, it said.
The average car can contain up the 3,000 semiconductor chips, and their shortage impacts on vehicle repair times, the ABI added.
The price of paint has been increasing and vehicles are becoming increasingly sophisticated and more costly to repair, it said.
A shortage of skilled labour in the vehicle repair sector is also an issue.
James Dalton, the ABI’s director of general insurance policy, said: “Like other sectors, motor insurers face rising costs.
“While it is going to be extremely challenging for these to be absorbed, insurers are doing all they can to keep prices as competitive as possible as millions of household cope with the cost-of-living crisis.
“As the FCA has said, the impact of their reforms to pricing rules introduced on January 1 this year could lead to some consumers paying higher prices if they used to benefit from significant new business discounts.
“For some it could still pay to shop around for the policy that best meets their needs.”