Car insurance premiums hit a six-year low in 2021, but prices could well increase in the coming months. That’s according to the Association of British Insurers (ABI), which has published its latest Motor Insurance Premium Tracker results, which records how much customers pay for cover, rather than what they’re quoted.
The figures show the average price paid for a year’s fully comprehensive car insurance came to £434. That’s a reduction of seven percent compared to the 2020 average, and the lowest annual average since 2015.
However, looking at the final few months of 2021 paints a slightly different picture. During the fourth quarter of the year, prices rose by £11 on the previous quarter, to £440, but that figure was still three percent lower than during the same quarter of 2020.
The ABI says the rise in premiums during the final quarter of 2021 suggests “continued cost pressures on insurers could be starting to filter through into the cost of cover”. Between 2015 and 2020, the average amount paid for damage to policyholders’ vehicles increased by 59 percent, while the average paid to third parties for damage to their vehicles rose by 32 percent – a huge cost increase for insurers.
At the same time, supply chain issues that are impacting other sectors are also causing some delays for repairers trying to access some replacement parts. And with road traffic levels returning to levels seen before the coronavirus lockdowns, claims are expected to increase in 2022.
What’s more, the Financial Conduct Authority (FCA) introduced new rules about car and home insurance pricing for new customers, preventing existing customers from being charged more than equivalent new customers. It’s thought these rules will see insurance prices rise as companies are forced to reduce the discounts offered to new customers.
“While we expect the motor insurance market to remain highly competitive in 2022, rising costs for parts, repairs and other supplies and services will continue to put pressure on premiums for motor insurance for both new and existing customers,” said Laura Hughes, the ABI’s manager for general insurance.
“Insurers appreciate that many households are facing a cost-of-living squeeze with rising household bills as costs rise in other areas of the economy, and they will be doing all they can to ensure competitively priced motor insurance, in the face of the variety of cost pressures faced. While the FCA pricing rule changes may well lead to fewer introductory discounts, it should still pay to shop around for the best deal for your needs.”