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Surging Car Insurance Costs: UK Drivers Hit by Record High Premiums Amidst Inflation and Repair Cost Surge

Car insurance costs have surged to a new high for the average UK driver, as the industry points to inflation and a significant spike in vehicle repair expenses as the culprits behind the increase.

A comprehensive study of 28 million insurance policies revealed that the average premium during the three months leading up to the end of June reached £511, marking a steep 21% escalation from the same period last year.

Disturbingly, some drivers have reported receiving insurance quotes that are three times higher than what they paid the previous year.

The Association of British Insurers (ABI) attributed these record-high rates to persistent cost pressures within the industry. The ABI disclosed that in the first quarter of the current year, a staggering £2.4 billion was disbursed in claims across all motor insurance categories – encompassing theft, vehicle repairs, and personal injuries. This sum represents a 14% upswing from the corresponding timeframe in the prior year.

The cost of vehicle repairs exhibited a remarkable 33% surge over the course of the year, soaring to £1.5 billion. This sharp escalation was attributed to mounting expenses, including energy inflation.

The ABI also highlighted that a single insurer had hiked labor rates by an astounding 40% between June 2022 and January of the current year. Furthermore, many replacement parts have become 21% more expensive, according to the ABI.

The surge in car insurance costs can also be attributed to factors such as rising paint and energy prices. For policyholders renewing their coverage, the average premium surged by £36 in comparison to the preceding quarter, settling at £471. Meanwhile, the average premium for new policies registered an increase of £21, reaching £566.

The ABI clarified that this discrepancy reflects the differing risk profiles of new and renewing customers. Typically, new customers may be younger and less experienced drivers, thus presenting a distinct risk.

Diane Cedra, a 66-year-old resident of Solihull in the West Midlands, found herself in a bewildering situation. Last year, she paid Saga £211.99 to insure her Peugeot 2008. However, upon the expiry of her insurance on July 31, she received a quote that was nearly triple the previous amount – an exorbitant £620. After negotiations and a customer loyalty bonus, she managed to settle at £411. Diane expressed her dismay at having to contribute to drivers who may be less cautious on the road. She questioned the fairness of the situation, stating, "I find it harsh that I might be having to contribute towards people who are having more accidents or are not driving as carefully as I am."

Karl Kemp of Burnley had a similar experience. He was informed by Churchill that insuring his Range Rover Evoque would now cost him £1,653.66, a substantial increase from the £925.90 he paid the previous year, despite no changes in his circumstances. He expressed confusion at the spike, especially since he had gained an additional year of no claims. After shopping around, Kemp found a more reasonable offer from First Choice that aligned with last year's premium. He emphasised the financial strain that an additional £700 would have imposed on his budget, stating, "If we had to pay an extra £700 on car insurance, there was just no way I could have afforded a car."

Consumer group Which? weighed in on the matter, highlighting that these record-high premiums are hitting consumers at a particularly challenging time, with financial pressures in various other areas. Which? questioned the justification for insurers passing on increased costs to policyholders, especially given the circumstances, and highlighted the importance of the Financial Conduct Authority's new Consumer Duty in ensuring fair value for insurance products.

In June, a report unveiled that 2022 was the UK motor insurance market's worst-performing year in the past decade. It revealed that insurers paid out £1.10 in claims and expenses for every £1 they received in premiums.

The ABI clarified that their analysis pertains to the average prices paid for premiums, not the quoted prices.


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