The drop will have given some much-needed relief to many households facing rising energy and food bills, with inflation currently at its highest rate for thirty years.
The ABI's Tracker is the only survey that looks at the price consumers pay for their cover, rather than the price they are quoted.
The latest Tracker shows that in the first quarter of 2022:
- The average price paid for comprehensive motor insurance was £416. This was a 5% drop over the year since quarter one of 2021. The current average premium is now at its lowest level since quarter 3, 2015.
- While it is too early to assess the impact of the Financial Conduct Authority's changes to the rules on pricing of motor and home insurance introduced on 1 January 2022, first indications show an increase in the difference between new and renewed average premiums paid. The average premium paid for a new policy in the first quarter was £105 higher than for renewals. The average premium for new policies was £480, up £34, on the same quarter in 2021, while the average for renewed policies, at £375, fell by £55.
The introduction in 2021 of The Civil Liability Act has helped to tackle the high number and cost of whiplash claims.
Cost pressures on premiums continue
Like many other sectors, motor insurers face rising costs. These include:
- The continued global shortage of semiconductors made worse by the impact of the Covid pandemic and the Russian invasion of Ukraine. The average car can contain up the 3,000 semiconductor chips, and their shortage impacts on vehicle repair times.
- Rising used car prices reflecting, in part, longer new car delivery times. Average used car prices rose by 30% in 2021 (source: Auto Trader)
- More expensive repairs, coupled with rises in the costs of raw materials such as paint, as increasingly sophisticated vehicles are more costly to repair. One insurer has estimated repair cost inflation at 11%.
- A shortage of skilled labour in the vehicle repair sector.
James Dalton, the ABI's director, general insurance policy, said:
"Like other sectors, motor insurers face rising costs. While it is going to be extremely challenging for these to be absorbed, insurers are doing all they can to keep prices as competitive as possible as millions of household cope with the cost of living crisis."
"As the FCA has said, the impact of their reforms to pricing rules introduced on 1 January this year could lead to some consumers paying higher prices if they used to benefit from significant new business discounts. For some it could still pay to shop around for the policy that best meets their needs".