The cost-of-living crisis continues to strike yet again. The latest statistics released by the Office of National Statistics (ONS) indicate that the price of car insurance has soared by 43.1% in the last 12 months. It seems that pressure on car owners has failed to ease, despite fuel prices having dropped from the record highs seen in 2022.
The observations made by the ONS are in contrast to the figures provided by the Association of British Insurers (ABI), who only report a 16% increase compared to 2022. The difference here is the ONS only tracks market quotations, whereas the ABI tracks the actual price paid by consumers.
A large proportion of the difference can be attributed to the fact that consumers will generally aim to cut costs by reducing the number of add-ons offered or making adjustments to excess payments. Both the ONS and ABI track these trends differently, with the ONS deeming this to be a change in the quality of insurance offered. On the other hand, ABI only tracks these adjustments as a price change.
Nonetheless, overall consumer sentiment is clear – numerous customers of the major insurance firms Direct Line and Saga have taken to the review site Trustpilot to voice their concerns, with one reviewer stating that their renewal price had risen for no apparent reason by 75% compared to 2022. Another complaint showed an increase of 77%, despite no change in circumstances.
When asked about rising costs, Direct Line attributed the increases to ‘higher costs’, stating that consumers are always encouraged to ‘shop around’ to ensure that they are receiving the best quotation. Saga attributed rising costs to ‘high levels of claim inflation’, noting that many existing claims processes such as ordering replacement parts is not only becoming more expensive, but is also taking much longer. Longer lead times result in increased costs for the insurer, as they must provide alternatives such as a courtesy car while the customer is awaiting repairs.
The ABI has concurred, observing that insurers are finding it ‘increasingly challenging’ to absorb any rise in costs. Research conducted by EY also indicates that the sudden increase in the cost of second-hand cars during the COVID-19 pandemic, coupled with a general trend towards higher wages, has reduced insurers’ profit margins significantly.
Consumers are recommended to make use of price-comparison tools to obtain the best deals. One major price-comparison platform – Confused.com – advises that despite the price increases, some savings can still be made from shopping around, or switching insurance suppliers regularly.