A report released by the Association of British Insurers (ABI) revealed that motor insurers in the UK disbursed an unprecedented sum for motor claims in the last year, reaching a total of £9.9 billion.
This amount translates to an average of £1.13 million every hour, setting a record since the ABI began tracking this data in 2013.
The 2023 figures also indicate a significant uptick in payouts, marking an 18% increase from the £8.4 billion recorded in 2022. The total number of claims settled saw a 10% rise, with insurers resolving 2.3 million claims. This includes compensation for theft, repairs, replacement vehicles, and personal injury claims.
A notable factor driving up the overall claims cost is the sharp increase in vehicle repair expenses, which surged by 31% to £6.1 billion from £4.7 billion in the previous year. This rise is attributed to a compounded increase in the cost of materials, up by 16%, and labour costs, which rose by 15%. Some garages even reported a staggering 300% hike in their energy bills throughout the year.
Vehicle theft payouts also hit a record high, with £669 million paid out, a 23% increase from £543 million in 2022. The average theft claim climbed to an unprecedented £12,600. Additionally, the expenditure on providing temporary replacement vehicles soared by 35% to £597 million, another record since such data has been collected.
Despite these increases, personal injury claim payouts saw a decrease, with £2.4 billion paid out in 2023, down 8% from the previous year's £2.6 billion. An inflation-adjusted comparison reveals that the average cost of a car insurance claim has risen by 23% since 2014, from £3,500 to £4,300, while the average premium increased by 8% from £505 to £543.1 over the same period.
The ABI report also highlights the growing cost of motor insurance cover, with the average price in 2023 standing at £543, marking a 25% increase from the previous year. In response to rising insurance costs, the ABI has unveiled a roadmap outlining ten steps to mitigate expenses for motorists.
This plan includes actions such as making more data available on insurance costs for different vehicles, implementing Graduated Drivers Licensing to enhance road safety, and advocating for a reduction in insurance premium tax.
Further, the ABI is conducting research to assess the viability and potential impact of social policies aimed at assisting low-income families with their insurance expenses.
Jonathan Fong (pictured above), ABI’s manager of general insurance policy, commented on the challenges faced by the industry, noting the significant and sustained cost pressures faced by insurers, such as a 31% rise in repair costs over the last year.
“Despite this, insurers continue to do all they can to ensure competitively priced motor insurance. Through our recently published Roadmap, the industry is working hard to combat rising motor insurance costs. And it can still pay to shop around to get the policy that best meets your needs at the most competitive price,” Fong said.
In other recent developments, ABI has entered discussions with BIBA as UK-based community car clubs are at risk of dissolution due to providers refusing to insure them.
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