Car insurance prices fall for the first time in 2 years

For the first time in two years, car insurance prices came down in the second quarter of 2024, but ethnic minorities and those with high levels of debt are still being forced to pay more on average for premiums.

Earlier this year, Citizens Advice (CA) told the Transport Select Committee that many motorists are being discriminated against by higher-than-average car insurance prices. The existence of what has often been described as the “insurance postcode lottery” has long meant that those living in areas populated with a larger proportion of people of colour are consistently quoted higher insurance premiums when covering their cars.

This pattern cannot be solely attributed to high crime rates in these areas. In its newest report, CA compared premiums from predominantly non-white neighbourhoods to those with similar rates of crime but different ethnic demographics and found that those living in areas with larger numbers of people of colour were charged on average £307 more per year for car insurance than white people.

It’s not just ethnic minorities that are being unfairly penalised, either; Citizen’s Advice analysed data from its debt clients and found that those who owed large sums of money are typically also charged more than average for car insurance. According to CA’s data, people in debt typically pay around 23 per cent more for car insurance, with this rising to 71 per cent for those in debt who are also from ethnic minority groups.

Citizen’s Advice says it supported the Labour Party’s pre-election pledge to urge the Financial Conduct Authority to investigate the unfair targeting of ethnic minorities and those on lower incomes by car insurance companies. It explained how “with new evidence showing that car insurance costs are still higher for people in debt and people of colour, it is vital that [an investigation] happens promptly.”

Yet, despite such a damning account of the past state of affairs, new data shows that things could already be improving for everyone. According to the latest report by the Association of British Insurers (ABI), the average price for car insurance dipped by two per cent in the second quarter of 2024, marking the first fall in prices since 2022.

This means the average price paid fell by £13 between April and June, following an increase of one per cent in the first three months, bringing the average premium to around £635 per year.

The ABI says such a reduction in prices comes despite rising repair costs and the average cost of items stolen from a vehicle hitting what it describes as a “record high” of £3,100. Nevertheless, the ABI’s director general, Mervyn Skeet, said, "After a very challenging period for insurers and customers alike, we’re encouraged to see an easing of increases to motor insurance premiums as claims costs stabilise.”

How much are you paying for your car insurance? Let us know in the comments section below...