UK car insurance costs hit new record as labour and repair fees rise

New figures released by the Association of British Insurers (ABI) track 28 million policies, giving the trade body our most accurate picture of the increasingly stiff car insurance premiums that UK drivers are being forced to stump up. The average premium that’s just been reported is a whopping 21 per cent higher than quarter two of 2022, and prices are at their highest since the ABI began tracking prices in 2012.

According to the ABI stats, drivers renewing cover found their premiums rising by £36 compared to the first quarter this year, up to an average of £471. Those buying new policies found average premiums have risen £21 to £566 compared to the first three months of 2022.

While the rises may look to many like an industry profiteering in tough times, the ABI defends the price rises by pointing to external factors driving prices higher. According to some analysis the UK’s motor insurers experienced their worst performing year in a decade in 2022, and the ABI claims the insurers have faced a 33 per cent increase in repair costs due to inflationary pressures.

The average price paid for motor insurance in the second quarter of 2023 continued its upward trend as insurers battle sustained cost pressures, such as a 33% rise in vehicle repair costs, according to the ABI’s latest Motor Insurance Premium Tracker.  

A recent report by Ernst & Young highlighted that for every £1 motor insurers received in premiums, they paid out £1.10 in claims and operating costs. Total payouts in the first quarter of 2023 were up 14 per cent compared to Q1 last year, to £2.4bn. Insurers have reported labour rates rising by as much as 40 per cent between June last year and January this year, while the cost of replacement parts has increased by 12 to 21 per cent.