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The cost of UK motor insurance has soared to an all-time high, according to a closely watched index, heaping extra pressure on households already confronting a cost of living crisis.
Motorists were quoted an average of £776 for motor policies in the second quarter, up a record 40 per cent on the previous year, according to an index from comparison site Confused.com and insurance broker Willis Towers Watson.
“The price increases we’re seeing are so significant that it’s going to cause real financial impact to many people,” said Confused.com chief executive Steve Dukes, who called for insurers to be “as competitive as they can be” despite industry pressures.
The second-quarter figure exceeded a previous 2011 peak of £663 to be the highest since the data set began in 2006. The methodology of the index was amended two years ago, with historic figures restated to be comparable.
Matthew Upton, interim executive director of advocacy at consumer charity Citizens Advice, said consumers were facing “price hikes from every direction, including essential services”.
The charity has estimated that one million people cancelled their car insurance last year as bills piled up, with those on universal credit especially likely to do so.
“Car insurance is an everyday necessity for so many people, whether the car is needed to get to work, take children to school, or loved ones to appointments,” Upton said.
“Now is the time for the government and insurance industry to consider bold ideas . . . to make sure no one is left stranded,” he added, suggesting discounted so-called social tariffs for people on benefits as an example.
Prices in inner London, where motorists pay the most, have now reached an average of £1,257. Young people pay even more: male drivers aged 17 to 20 across the UK saw their premiums rise by 60 per cent to £2,414 on average, according to the index.
Insurers argue significant price rises are essential given the inflation in the value of payouts on accident claims, which reflect the rising costs of labour, car parts and replacement vehicles.
Tim Rourke, UK Head of P&C pricing, product, claims and underwriting at Willis Towers Watson, said insurers were having to deal with a “cocktail of rising costs”, including rising vehicle theft and long repair times, which are “all pushing costs above premium income and forcing insurers to play catch-up by increasing prices”.
Rising costs have eviscerated profits for UK motor insurers. Last year represented the worst underwriting conditions in a decade, according to analysis from consultancy EY.
Car insurance prices are expected to rise further: one recent industry forecast predicted they will not level off until 2025. Motor insurers will report their half-year results in the coming weeks.