‘Greedy’ UK car insurers blamed as soaring premiums far exceed rise in payouts

The latest industry data shows record car insurance payouts, with the Association of British Insurers (ABI) claiming its members coughed up £1.13 million in payouts every hour during 2023. But a look beneath the headline figure reveals payouts rose by just 18 per cent across the year, while the increase in average driver premiums soared by 34 per cent. 

Meanwhile, as UK premiums were hiked, drivers in other European countries affected by many of the same inflationary pressures blamed by the ABI for spiralling UK insurance costs, have been faced by much more modest car insurance price rises. In its full-year financial results, the UK’s biggest insurer Admiral says it increased driver premiums by an average of just 2 per cent in France, 5 per cent in Spain and 6 per cent in Italy.

“Reports show that UK car insurance is up by a third. The huge disparity, in contrast to European counterparts such as France, where it has risen by only 2 per cent raises serious questions about the motor insurance industry in the UK. This is only further heightened by the fact that UK insurers have revealed the amount they paid for motor claims went up by about 18 per cent last year,” said John Kushnick, Legal Operations Director at claims firm National Accident Helpline.

“Ultimately, it’s a case of UK car insurance payouts lagging far behind the rising cost of cover with the reason behind this - insurers’ greed,” he commented.

According to Kushnick, that greed is also evident in the ABI’s attempts to blame “a non-existent compensation culture” in the UK for its efforts to avoid reduced payouts in whiplash cases.

“We are seeing this time and time again – last week, the UK Supreme Court unanimously rejected the challenge from insurers in a landmark whiplash case for motorists in another example of insurers, attempting to avoid or justify reducing payouts by using calls of ‘fraud’ and ‘overcompensation’, he said.

Insurance companies, on the face of it, have few qualms about passing high costs on to customers. Last summer we quizzed Britain’s biggest motor insurer Admiral after it revealed it had increased UK premiums by 21 per cent on average in the first half of 2023, a rise that was three times the size of the seven per cent inflation rate recorded by the UK’s Cost Price Index (CPI). This contrasted with Admiral’s motor insurance premiums in Italy, France and Spain, which were raised by only three to six per cent in the same period - indeed, Admiral’s rises were below the national CPI inflation rate in both Italy and France.

In spite of appearances it was not a case of ‘rip-off Britain’ pricing, we were told. 

“UK claims inflation has been much higher than CPI, impacted by a variety of things including the number of second-hand cars available, which increases claims payouts and the cost of providing a customer with a courtesy car; and the increase in labour costs, which has been exacerbated by a shortage of skilled labour,” said Admiral’s head of group external communications Addy Frederick, who also told us that Brexit was implicated as a factor in the skills shortage.
“During lockdown, premiums fell as fewer people were driving due to lockdown restrictions so premiums are rising from a lower base. Having said that, we are actively engaged in managing our costs so we can deliver competitively priced premiums, especially since in the UK many customers buy their policies using a price comparison website,” she said.

However, Admiral also stated in its half-yearly report that it was focused on protecting margins, and had itself ‘increased prices ahead of the market, with market prices now increasing more strongly’ as a result. 

Rising insurance prices, and the associated hardship for many drivers, have led to an increasing number of calls for a Financial Conduct Authority investigation. The FCA has so-far ruled out the full market inquiry that many would like to see, but says it does intend to make a new assessment of the market this year.

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