Average UK car insurance policy hits record £500 per year

The average car insurance premium in the UK exceeded £500 between April and June after prices rose by 21% compared with the same period last year.

According to a report published by the BBC, the average driver’s policy cost £511. Renewals were priced at an average of £471, while new policies hit £566.

Insurers have attributed the increase to a sustained rise in costs. The £2.4 billion spent on covering vehicle repairs, replacement and injury during the first quarter of 2023 was 14% greater than over the same period 2022, said the Association of British Insurers (ABI).

The ABI added that the cost of parts has increased by 21%. This is due in part to supply shortages caused by the Covid-19 pandemic, which have spawned a black-market trade of thieves stripping parked cars for components.

A bulletin published by the ABI in March stated that 40% of vehicle repair work was affected by shortages and that courtesy car costs for insurers had increased by 30%.

According to insurance comparison site confused.com, premiums are even higher than reported by the BBC. Confused.com’s quarterly price index found the average to be £776 between January and March, the highest since it began reporting in 2006.

It noted that the increase was also likely to be a product of the General Insurance Pricing Practices (GIPP) that came into effect in 2021. The GIPP barred insurers from charging repeat customers more for a policy than a brand-new customer. “In response, insurers adjusted their pricing, meaning new business prices are likely to have increased,” said the confused.com report.

It added that motorists aged under 20 were charged significantly more due to the risk they pose: 18-year-olds paid an average of £2404 and 19-year-olds were charged £2097. These younger drivers also bore the brunt of the price hikes, with 18-year-olds’ policies rising by 65% year on year, and 19-year-olds’ increasing by 59%.