The latest General Insurance Price Index from Pearson Ham Group indicates that premiums for motor and home insurance continued to decline in May 2025, with the rate of reduction outpacing that recorded in April, reflecting further softening across the personal lines sector.
Motor insurance premiums fell by -1.7% in May, a sharper decrease compared to April’s -0.8%. The more pronounced decline points to a market softening that may be deeper and more sustained than previously observed.
Over the past 12 months, average quoted motor insurance premiums have decreased by -17%. The median of the top-five quoted motor premiums is now £455, down from £467 in the previous month.
The data, while offering different numbers, does reflect similar findings from the Association of British Insurers (ABI). It showed the average annual private car insurance premium stood at £589 in Q1 2025, reflecting a 5% decrease from £621 in Q4 2024. Despite falling premiums, the sector continues to contend with higher claims costs. Motor insurers reported a record £11.7 billion in claims paid during 2024, a 17% increase compared to the previous year.
The rise in claims costs has been attributed to factors such as increased repair expenses and parts shortages. Premium reductions have not been uniform across all customer segments; younger drivers under the age of 26 saw the steepest declines at nearly 17% year-on-year, while older drivers over the age of 70 experienced a 13.4% drop.
Stephen Kennedy (pictured above), director at Pearson Ham Group, noted that while the previous month’s figures suggested stabilisation in motor pricing, the renewed acceleration in May signals continued market softening.
“Insurers appear to be adjusting rapidly to shifting claims dynamics and competitive pressure, which is now manifesting as more pronounced reductions across a broader range of customer segments. The coming months will reveal how much this cycle continues,” Kennedy said.
Home insurance premiums also registered a significant monthly decline in May, dropping by -1.9%, the steepest fall over the past year. The annual decrease now stands at -6%. According to the data, intensified competition and evolving perceptions of risk are contributing to continued downward pressure on prices.
The average cost of a combined buildings and contents home insurance policy was £265.54, based on data from Moneysupermarket. The cost has been influenced by various factors, including the frequency of claims and the revaluation of property rebuilding costs amid broader inflationary trends.
Although home insurance claims have not risen at the same rate as motor claims, shifts in the cost of materials and labour continue to affect underwriting calculations. These developments suggest that pricing strategies remain under review as insurers navigate changing risk exposures and customer expectations.
Frances Luery, product manager at Pearson Ham Group, stated that the rate of decline in May highlights the extent to which the home insurance market is softening.
“This is the largest single-month fall we’ve recorded in recent months and points to a rapidly evolving pricing environment. Insurers are clearly re-evaluating their strategies, and, as pricing becomes more granular, we expect to see even greater segmentation and volatility emerge,” Luery said.
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