The average price paid for comprehensive motor insurance rose 1% in the first quarter of the year, according to industry data indicating an easing in the steep rises seen last year.
The latest tracker issued by the Association of British Insurers (ABI) showed a 1% increase on the previous three months to £635.
That was despite the average claim paid rising 8% to reach a record of £4,800, the body said.
The ABI said the disparity showed that its members were “absorbing” additional costs and not passing them on.
Nevertheless, the average policy was still 33%, or £157, higher between January and March compared to the same period last year.
Premiums hit record levels in 2023 to reflect a surge in additional costs and claims.
The ABI reported a 23% hike, compared with the year-ago period, with £9.9bn paid out in claims.
That was the highest annual claims figure since the ABI started collecting the data back in 2013, the organisation said.
Insurers had flagged a 16% spike in the cost of paint, with spare parts also rising on average by a double-digit figure.
Other bills, largely driven by the price of energy, were up by 46%, the ABI’s report had said.
They included delays in repair and supply chains and the fact that increasingly sophisticated car technology made repairs more expensive.
The rise in premiums also reflected, it warned, a surge in uninsured drivers who did not take out policies likely because of pressure on their personal finances from the wider cost of living crisis.
The 1% rise in premiums could reflect growing regulatory pressure on the industry.
Insurers faced a further warning from the Financial Conduct Authority (FCA) in March over values placed on written-off and stolen cars.
The watchdog said it was concerned that insurance customers were only getting a better deal in settlement of their claim when they complained.
The industry has also faced accusations that drivers who cannot afford to pay for cover annually were being stung with high levels of interest.
The consumer group Which? recently found APRs being applied to monthly payments of almost 40%.
The average rate across 27 providers that charge interest and disclosed their rate was 23.37%, its report had suggested.
Which? demanded action from the FCA.
The ABI responded last week to insist its members were taking action to address the concerns.
Its director of general Insurance policy Mervyn Skeet said of its latest tracker data: “We understand that car insurance costs are putting pressure on household finances.
“These figures show how competitive the motor market is, with insurers absorbing significant cost rises but keeping prices relatively stable.”
Which? director of policy and advocacy Rocio Concha said in response: “While it’s encouraging to see the price of premiums steadying, they still remain eye-wateringly high and prohibitively expensive for many drivers.
“It won’t be lost on motorists that premiums increased by a quarter in 2023 compared to 2022.
“To make matters worse, some who can’t afford to pay for their annual cover all in one go are being stung with interest on monthly repayments of up to nearly 40 per cent, which can add hundreds of pounds onto the final bill.
“The regulator needs to get a grip of the issue quickly by making clear that insurers squeezing customers paying monthly with excessive interest rates to make higher profit margins than those paying annually does not meet fair value requirements, and setting deadlines for firms to fix this.”
Source Agencies
