The cost of car insurance continues to rise, with premiums increasing further in the third quarter of 2023.
According to data from the Association of British Insurers (ABI), the average price paid for motor insurance from July to September was £561. This represents an increase of 9% from the previous quarter and a substantial 29% jump from the same period last year.
Several factors are driving the increase in premiums. Insurers face escalating costs for repairs and materials. For example, the price of paint has gone up 16%, spare parts are up 11%, and other costs such as energy-related expenses have skyrocketed 46%. Vehicle repairs are also becoming more complex and expensive with advances in technology.
Insurers pay out £1.10 for every £1 received in premiums, meaning they are operating at a loss. The ABI is calling on the government to reduce the Insurance Premium Tax (IPT), which makes up £60 of the average premium. Cutting the IPT could offer immediate relief to hard-pressed motorists.
Drivers have options to reduce costs, including shopping around, accepting higher voluntary excess, adding security features to vehicles, and taking advanced driving courses. However, with insurers under pressure from rising claims costs, premium increases are likely to continue. Drivers should talk to their insurer about steps they can take to minimise premium hikes.
The soaring cost of motor insurance reflects the broader inflationary environment. However, a cut to the IPT could ease the burden on drivers struggling with the growing cost of living. With motorists hit from every direction, action is needed to address insurance affordability.