The average motor insurance claim shot up by 6% to £2,839 in the second quarter of 2017, compared to the same period last year, according to new statistics.
The Association of British Insurers (ABI) said motor insurance providers paid out £2 billion in claims for the period, with higher repair bills and increased theft costs cited as the drivers.
Just how much went to vehicle repairs? According to the ABI, it was the highest quarterly figure on record at £1 billion – a 3% rise versus the second quarter of 2016.
“The average cost of repairing the damaged vehicles of policyholders, at £1,770, has risen by 33% over the last four years since quarter two, 2013,” said the trade body. “The increasing complexity and technology now incorporated into vehicles and, in recent times, a weaker pound that has led to more expensive spare parts, are behind rising repair bills.”
As for incidents of theft, the cost rose 21% to £68 million for nearly 13,000 cases – the highest quarterly level of theft claims since early 2013. The ABI attributed the rise partly to the increasing use of high-tech devices, which makes life easier for car thieves.
“Aside from rising repair costs, one-off changes in reserving to comply with Solvency II requirements and more reinsurance ceded contributed to a fall in net premium income and an overall underwriting loss of £194 million in 2016, following the profit, the first since 1994, of 2015,” added the ABI.
For ABI head of motor and liability Rob Cummings, cost pressures continue to dominate the motor insurance market.
“Rising repair bills reflect increasing vehicle technology and complexity, but also the availability and cost of some spare parts sourced overseas,” he explained. “We need the best possible Brexit deal to help ensure availability of vehicle parts.”
Cummings added: “These figures further highlight why the Government needs to act to help relieve unnecessary industry costs.”
He said the recent announcement to introduce legislation reforming the Ogden rate should help.
“It is also important that the Government effectively implements their whiplash reforms, and that there are no further hikes in Insurance Premium Tax,” continued Cummings.
It’s interesting to note though that the commercial motor market recorded a profit of £96 million – remaining buoyant for the second consecutive year.
Related stories:
What will the new Ogden rate mean for insurers’ earnings?
ABI confirms motor insurance has hit a record high
