Average UK car insurance quote hits record £995

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

UK motorists are being quoted a new record sum of almost £1,000 for the average annual insurance policy, after a dramatic acceleration in prices that has prompted concerns over extra pressures on household budgets.

Motorists were quoted an average of £995 for annual policies in the final quarter of 2023, an increase of 58 per cent on the year before, comparison site Confused.com and insurance broker Willis Towers Watson said on Tuesday.

Confused.com, on whose platform the index of quotes is based, said it was a “bleak time for drivers and their car insurance”. 

People just eligible to drive, at 17 years of age, received quotes of £2,877 on the average policy, according to the data. That represented a 98 per cent year-on-year increase in price for those motorists, which insurers view as higher risk.

Insurers lifted their premiums sharply last year in response to a surge in the cost of their claims, driven by big increases in the price of car parts, second-hand cars and labour.

That cost inflation pushed the sector to its worst underwriting loss in a decade in 2022, triggering profit warnings and share price falls. But conditions in the sector have stabilised over the past year as insurers started to push through big price rises to counteract the claims costs. 

Prices are set to increase this year, according to industry forecasts, even as politicians and consumer groups voice concern about the impact of rising costs on the millions of households reliant on a car for work and family life.

“It’s important that insurers remember that the mandatory nature of the cover means that pricing [here] will always be subject to much greater scrutiny than other lines of business,” said Duncan Minty, an independent consultant on ethics in insurance.

Citizens Advice has previously urged the government and insurers to consider “bold ideas” that can take pressure off cash-strapped households for a financial product it deems an “everyday necessity”.

Tuesday’s index showed an 8 per cent increase in the cost of the average policy between the third and fourth quarters of 2023, meaning the rate of growth decelerated compared with earlier in the year.

Drivers in inner London, the most expensive part of the UK to insure, paid £1,607 on average.

Louise Thomas, motoring expert at Confused.com, said that while data suggested “increases could be slowing for now”, drivers should consider adding antitheft features, such as wheel locks, to their car, or reviewing how many miles they drive, to bring costs down. 

The index reflects prices that are quoted to customers, who might go on to find cheaper cover elsewhere.

By contrast, the average annual policy cost £561 in the third quarter of 2023, a yearly rise of 29 per cent, according to the most recent edition of the Association of British Insurers’ own index, which is based on premiums paid by customers.

The Confused.com data set runs back to 2006, but its methodology was amended a few years ago, with historic figures restated to be comparable.