Motor insurance premium hikes stabilise

Motor insurance premiums rose by just 1% in the first quarter of 2024, the first sign that growing pressures on drivers could be stabilising.

However, rises have been reduced because insurers have absorbed the growing costs, with the average claim paid rising by 8% to reach a record of £4,800.

The data comes from the Association of British Insurers (ABI) Motor Insurance Tracker.

The tracker analyses nearly 28 million policies sold a year and the claims paid out against these policies.

According to the data, the average comprehensive car insurance premium is now £635, up 1% on the previous quarter at the end of 2023.

In real terms, motor insurance prices are just £8 more expensive than the previous price ‘peak’ at the end of 2017. This is partly because prices fell significantly during the pandemic.

In contrast, over the same period (end of 2017 to now), the cost for insurers to pay claims has risen by 23%.

Top tips to reduce your insurance premium renewal:

• Don’t just accept your renewal quote. Shop around and see if you can find a cheaper deal.
• Limit your mileage. Cutting down on how much you drive could reduce your premiums.
• Change your car. Swopping for a different manufacturer or model can save you money.
• Keep your car safe. Car burglaries are on the rise, with keyless cars proving particularly easy to steal. Get a more affordable premium by keeping your car in a garage or secure driveway when you’re not driving it.
• Increase your excess. Opting to pay more to have damage repaired if you have an accident, will bring down your quote.
• Reconsider your job title. Certain careers are deemed to come with more risk so think carefully about how you choose to describe your role.

Why is paying monthly for car insurance set to get cheaper?

One thing that will no longer make as much difference to the price you pay for your insurance premium, is opting to pay monthly.

This comes after insurers said they will ‘try and manage the amount that those paying monthly for their motor insurance are charged for the benefit’.

In the past, paying monthly was always a more expensive option than paying your annual premium in one go.

Insurers argued that they had to charge more for monthly payments because there was more administration involved in the process. They also said that because they didn’t receive the premium up front, they couldn’t reinvest it or use it to help pay for claims.

After the FCA and AIB intervened, insurers announced that this is set to change. They will now make sure drivers who pay monthly receive ‘fair value’. And will make sure any extra charges will be made clear to drivers before they agree to their monthly payments.

This is great news for low-income drivers who are more inclined to spread the cost of their insurance premiums.