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Car insurance premiums have risen 50 percent in the past year, with millennials and older drivers hit the hardest.
Car Insurance Uk Rise
Exclusive data from analysts Consumer Intelligence, which looks at quotes from Confused.com, Go Compare, Compare Market and MoneySuperMarket, reveals that average premiums have increased by an average of 48 percent in the 12 months to June 2023. the highest since early 2018.
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Car insurance is quickly becoming one of the most expensive household bills, adding to the financial pain at a time of high inflation and rising mortgage and rental rates.
In June, Ernst and Young economists warned that 2022 would be a difficult year for insurance companies and predicted that premiums would increase by 16 percent by the end of 2023. But the latest figures show that they have already quadrupled.
David Trenner, 67, was shocked to discover last month that Esure had increased the annual premium for his Renault Clio from £283 to £547 – a 93 per cent increase. “I expected a slight increase due to inflation, but not 93 percent.
According to Consumer Affairs, people between the ages of 25 and 39 and 65 were hit hardest by the increase in car insurance, with average premiums increasing by 50 percent. Drivers in Scotland and London saw their premiums increase the most.
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It comes as executives at the top five companies were handed six- and seven-figure salaries and bonuses last year. Admiral Group paid a total of £2.15m to its chief executive Milena Mondini de Focatiis and £1.23m to financial director Geraint Jones, while Aviva chief executive Amanda Blanc earned £5.52m.
That “price inflation will be a factor but cannot account for 48 percent [of the total increase]”. He said a lack of transparency in insurance companies’ risk models and an increase in claims after the pandemic are also possible reasons.
But he admits that not much can be done, adding: “I’m not sure what the regulators can do because the recent interventions have generally resulted in higher premiums for many people. The initial offer is expensive, they can’t do that now.
The Financial Conduct Authority (FCA) said the high cost of repairs had led to a rise in motor insurance prices, but Tim Kelly, insurance expert and owner of the MotorClaimGuru.co.uk website, said some insurers were raising the price. increased profits due to the covid pandemic.
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“There is a lot of smoke and mirrors. Because of Covid, the insurance companies made massive profits. Now that we have come out of Covid and into a completely different economic climate, the insurance companies want their profits and not cover the huge costs of inflation. In short, consumers are losers and insurance companies are winners,” he said.
An FCA spokesman added: “We will continue to monitor the market to ensure customers are getting a fair deal from their suppliers.”
Insurance companies say the main culprit is inflation. Rising energy bills and the rising cost of paint and materials have added to the cost of repairs, which have risen by 33 percent, according to the British Insurance Association. Car insurance costs are increasing by 30 percent, while inflation has also driven up the cost of personal injury claims, he said.
Catherine Carey, head of marketing at Consumer Intelligence, said: “As a result of this inflation and hidden premium increases in 2022, the motor insurance market has reported significant losses. Insurers are now adjusting prices to recover these losses and the current impact is to reflect to give.
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Meanwhile, the cost of living crisis has exploded insurance fraud. motor insurance fraud was the most common type of opportunistic fraud reported to the City of London’s Insurance Fraud Enforcement Unit between March 2022 and April 2023.
“By making high claims or providing false information when applying for insurance, fraudulent consumers raise the cost of insurance for everyone else,” Ms. Carey said.
Another factor is the change in regulations. The so-called loyalty penalty was banned from 2022, meaning insurers would have to pay more for new customers than existing customers.
Charts and numbers from four major aggregator sites show big increases in car insurance premiums over the past year (Consumer Intelligence)
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According to James Daley, managing director of consumer group Fairer Finance, this has increased prices for everyone – especially those who shop around for a cheaper annual policy.
“Premiums are driven by two main factors – inflation and changes in regulations. The cost of repairing cars and auto parts has increased like everything else in the past year – as have the costs of personal injury claims. All of this lead to the price of insurance is high, “he said.
Behavioral changes also have an effect, experts say. Two years ago, the number of claims was lower than normal due to fewer people driving during the pandemic. But now that people are returning to their normal routines, the number of claims is rising again – and so are the premiums.
The sheer number of electric cars can also play a role, as repairs can be more expensive than a standard car. LV Insurance added that “new high-tech vehicles equipped with sensors, cameras and high-voltage systems increase the cost of spare parts and also require specialist work”.
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Direct Line said it prices consumer policies “based on our view of risk, the valuation factors we use and inflation”.
Those aged 25 to 39 and 65 and over face the highest rate of auto insurance inflation, with average increases of 52 percent and 50 percent, respectively.
Those under 25, who traditionally suffer the most expensive premiums, saw the lowest rate of increase, at 38 percent. This may be due to the availability of telematics policies that record drivers’ speed and braking distance to assess their risk of an accident, and have focused on the percentage of young drivers.
Drivers may also see price increases while they live. London and Scotland saw the biggest increases, up 53 percent for the new policies. The Northeast had the lowest increase at 43 percent, followed by the Northwest at 45 percent.
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However, an analysis of the first five words returned on a comparison site that consumers usually choose reveals a slightly different story. It shows that 25-39 years old face the greatest car insurance inflation (47 percent), followed by 17-24 years old in the 65-and-over group (both 46 percent).
The increase in premiums for older customers may be due to the increase in the number of drivers aged 80 and over, which has increased by 18 per cent in the past two years to 1.7 million, according to the DVLA. Older drivers may be considered a higher risk, increasing the average premium for the 65+ category.
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Confused.com, the price comparison company, said that the average 17-20 year old saw their insurance cost more than £1,000 more than the same time last year.
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Steve Dukes, chief executive of Confused.com, told Radio 4’s Today programme: “The number of claims has increased in recent years, since the pandemic, but so has the cost.
“The price of used cars is higher than ever, the price of parts, the price of repair work – and this is all that they passed on to the consumer.”
Used car prices – the usual first car for a newly qualified young driver – have been volatile for months amid the Covid pandemic. While new car production has slowed due to a global shortage of computer chips and other materials needed for manufacturing, demand for used cars has increased.
In March 2022, according to the Office of National Statistics, the price increase in the used car market reached 31%. They have fallen back heavily since then.
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But the young drivers faced the harshest fall. For 17-year-olds, premiums rose by an average of £1,423, to £2,877. For 18-year-old drivers, the average policy price rose to £3,162.
The data is calculated based on the average of the five best quotes received from Confused.com, excluding the prices actually paid for policies.
Mr. Dukes said there are ways to reduce premiums. “Where they can legally share the drive with an older and more experienced driver and add that person as a nominated driver, that can have a really significant impact and reduce the cost by hundreds of pounds, it’s really worth it look.” said. . .
Mr Dukes also suggested that young drivers should investigate the use of telematics, outboards, or ‘drive as you pay’.
