The average cost paid by policyholders for motor insurance in 2021 dropped to its lowest level in six years, a new report by the Association of British Insurers (ABI) has found.
ABI’s latest “Motor Insurance Premium Tracker” report also found that the average price paid for comprehensive motor insurance was £434, which represents a 7% decrease from 2020 to its lowest level since 2015. It also discovered that in Q4 2021, the average premium paid climbed by £11 on the previous quarter to £440 – but despite this, the average premium was 3% lower than Q4 2020.
The rise in the average motor insurance premium paid in Q4 2021 suggests that continued cost pressures on insurers could soon start to affect pricing, the ABI said. The group noted that between 2015 and 2020, the average amount paid for damage to policyholders’ vehicles increased by 59%, while the average paid to third parties for damage to their vehicles rose by 32%.
ABI also pointed out that issues with the supply chain affecting other sectors is causing delays in accessing replacement parts. Road traffic is also slowly returning to pre-lockdown levels, and the ABI is expecting claims to rise.
“While we expect the motor insurance market to remain highly competitive in 2022, rising costs for parts, repairs and other supplies and services will continue to put pressure on premiums for motor insurance for both new and existing customers,” said ABI general insurance manager Laura Hughes.
“Insurers appreciate that many households are facing a cost-of-living squeeze with rising household bills as costs rise in other areas of the economy, and they will be doing all they can to ensure competitively priced motor insurance, in the face of the variety of cost pressures faced,” the general manager added.
Last year, the ABI’s previous report found that while the number of motor insurance claims settled by insurers fell by 19% in 2020, the average personal injury claim jumped by 13%.
Meanwhile, in response to the report, Matthew Maxwell Scott, executive director of the Association of Consumer Support Organisations claimed the ABI was being a “bit rich” in celebrating the minor fall.
“Motor insurers made excess profits of £3.3 billion during 2020-21, equating to a £118 reduction in the price of motor insurance,” he said. “So, it’s a bit rich for the ABI to trumpet a £30 fall in the cost of the average premium. A 7% drop in prices barely scrapes the surface of what should have been handed back to hard-pressed consumers, and now insurers are warning those same consumers that their car insurance is due to increase again this year.
“ACSO does not believe the insurers are playing fair. As a compulsory product, providers of car insurance have a special responsibility to treat customers fairly. The Business Secretary should investigate what looks like a clear case of rampant profiteering during the pandemic.”
