The average UK car insurance premium rose by £5 in the second quarter of 2022 amid rising repair costs and second-hand values, according to figures out this month. Data from the Association of British Insurers (ABI) found the average premium hit £419 during the second quarter of this year, up from £414 in the first quarter.

That rise represents a 1.3-percent increase in the second quarter, but prices remain £11 lower than during the same quarter last year. However, the ABI has warned that it is becoming “increasingly challenging” for insurers to “absorb rising cost pressures”, such as increasing second-hand car prices and more expensive vehicle repairs.

As the new car industry is being impacted by the global semiconductor shortage, which has reduced the supply of microchips, so too is the insurance industry. The ABI claims the average car can contain up to 3,000 semiconductor chips, and the shortage is affecting vehicle repair times.

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At the same time, the insurance industry is also dealing with delays in accessing spare parts, as well as more expensive repairs as vehicles become increasingly complex. And the ABI says there’s a shortage of skilled labour in the vehicle repair sector, which is impacting repair times and costs.

What’s more, the industry was hit enormously by new legislation, which came into force on January 1, 2022. Under the new rules, insurers were no longer allowed to offer new customers more attractive premiums than existing customers would receive. At the time, the Financial Conduct Authority admitted the rules might lead to some consumers paying higher prices – particularly if they were switching insurers regularly – but the regulator said the system would become fairer.

While the ABI admits it’s “still too early” to assess the impact of the new regulations, the Motor Insurance Premium Tracker data shows the average premium paid for a new policy in the second quarter was £129 higher than for a renewed policy. Average premiums for new policies increased by three percent to £500 and average premiums for renewed policies increased by 0.5 percent to £371.

“Insurers appreciate that these are difficult times for many households dealing with the rising cost of living,” said Callum Tanner, the ABI’s manager for general insurance. “While, like many other sectors, motor insurers are facing higher cost pressures of their own, which are becoming increasingly challenging to absorb, they will continue to do all they can to keep motor insurance as competitively priced as possible.”