Car insurance: used car prices and rising repair bills behind 16% jump in costs
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Car insurance bills have risen 16% since last year as insurers pass on rising costs to motorists, according to the latest official figures.
The Association of British Insurers (ABI) said its members were struggling to absorb rising costs associated with repairing and replacing vehicles, leading to the above-inflationary rise in average premiums. The average fully comprehensive premium now stands at £478 - the highest price recorded since the end of 2019.
The industry body said its members were trying to offer fair deals to drivers but rising energy bills for workshops, combined with soaring paint prices and courtesy car costs were pushing up the cost of repairs. It said that the continued rise in used car prices - which are now around 29% higher than two years ago - was contributing to the spiralling cost of claims.
Jonathan Fong, the ABI’s senior policy adviser for motor insurance, said: “With households battling the rising cost of living, the last thing anyone wants is a higher motor insurance bill. Naturally, every motorist wants the best insurance deal, and insurers are doing all they can to keep motor insurance as competitively priced as possible.
“Yet, like many other sectors, insurers continue to face higher costs. The price of certain raw materials and energy costs are rising at rates well above general inflation, and these costs are becoming increasingly challenging to absorb.”
The figures for the first quarter of 2023 show that the average policy also increased between the final quarter of 2022 and the first three months of this year. The cost of renewing a policy rose by £8 to £436, and the price of a new policy increased by £14 over the same period, to £545.
Rules introduced by the Financial Conduct Authority at the start of 2022 were designed to ensure that drivers don’t pay more to renew a policy than they would if they were a brand new customer. The rules do not put a cap on the cost of a premium and the ABI said that the price of insurance will continue to reflect a range of factors, including the cost of settling claims.