According to the Office for National Statistics, the cost of car insurance has risen by an average of 43 per cent in the last twelve months alone, with some drivers now reporting that their bills are now more than double what they were a year ago.
The average bill is currently £511, according to the Association of British Insurers (ABI), and the industry is blaming inflation and rising repair costs for the sharp rise in costs, which is expected to continue.
Some fear drivers will have to be taken off the roads if costs continue to rise. Louise Thomas, car insurance expert at Confused.com, said: “If prices remain at this level, there is no doubt that drivers will have to be taken off the road as they also face other rising costs.”
So who is to blame for the skyrocketing costs? We’re turning to experts to find out what happened.
inflation
Rory Yates, global strategy lead at insurance platform provider EIS, said there was much more insurers could do to help customers reduce prices on their plans.
“While inflation is a concern for insurers, many are passing on more to their customers than just these additional costs.
“Loss inflation for auto insurers is much higher than core inflation because the cost of claims has increased so much more. As poor economic conditions continue to worsen, fraud and opportunistic fraud in particular have increased.”
The ABI said the cost of car repairs rose 33 percent to £1.5 billion in the year, driven by rising costs including energy inflation.
Although inflation has been high for two years, its impact is felt late as supplies and parts prices are pre-set, so motorists are only now seeing higher bills.
Yates added: “Insurers also set their prices in advance, taking into account the extent of potential future inflation.”
Other experts say the lack of transparency in auto insurance could be a factor in the growth.
Pete Ridley, car finance expert at Car Finance Saver, said: “While insurers are facing legitimate cost pressures which have led to higher premiums, there are concerns that some are passing on more costs than necessary, potentially leading to inflated prices.” .
“Insurers may also be looking to recoup losses from previous years, which is contributing to the significant growth we have seen recently. A lack of transparency in insurers’ risk models and a potential increase in claims as a result of the pandemic are cited as factors influencing pricing decisions.”
Brexit
In addition to inflation, the effects of Brexit have created problems in the supply chain.
Shortages of semiconductors and other materials needed to repair vehicles have increased repair costs.
Ridley said: “The shortage of new cars due to production disruptions during the pandemic has driven up prices for both new and used cars, which has impacted insurance costs.”
Yates believes insurers could do a better job of managing some risks.
“The cost issues in the supply chain, which contribute significantly to the rise in claims, could be better addressed by creating systems that improve the flow of data during the repair and claims processing process, thereby reducing costs, for example by parking vehicles with suitable space for the workshop. “Probably the best option is the possibility of damage. A solution for everyone involved and a significant improvement in the customer experience.
“Garages tend to be less visible than shops or post offices, so people don’t notice when they disappear. But the lack of supply and increased demand have led to long wait times for repairs, even as people pay higher costs.”
Currently, the average age of a garage owner is 65 years. Many of these owners will likely decide to get out of business when they retire, while many have had to close their doors during the pandemic as there are fewer cars on the road.
Over the past ten years, the number of damage repair companies has dropped by more than 20 percent.
“If insurers worked better with the repair network, they might be able to find a better solution than sending people to their local garage with a two-week wait when they could go to a garage a little further away and have a shorter wait. “Make better use of resources and offer drivers better value for money.”
Policy changes
Another factor is the ban on “loyalty bonuses”: in January 2022, the Financial Conduct Authority (FCA) banned car and home insurers from charging existing customers higher fees for renewing their policies.
This has prompted insurers to raise prices on their core products to make them more profitable.
Additionally, as driving behavior normalizes post-pandemic, the number of claims has increased, resulting in higher claims costs for insurance companies. Increasing frequency and severity of claims is driving up insurance premiums.
Electric vehicles
The growing popularity of electric vehicles is also driving up insurance costs.
They usually have more advanced equipment and therefore cost more to repair. Higher repair costs fall on drivers, not just EV owners, Yates said.
“When we see collisions involving these types of vehicles, it appears that the damage is more costly, resulting in higher repair costs.”
In addition, large insurers, including Admiral, are increasing their prices, which has prompted other insurers to also increase their prices. In the first half of the year, prices were increased by 20 percent, which led to a massive exodus of customers, as well as other insurers who raised their prices.
He believes the government needs to intervene before prices rise further.
“This is a much more complex issue than just the impact on economic inflation and needs to be addressed at the government level.” There are things that insurers can and should do, but there are also things that need to be addressed elsewhere. The time for cooperation has now come.”
Source: I News
I’m Jeffery Bryant, and I’m an experienced author specializing in automobile news. For the past several years, I have been working as a writer in a well-known news website. During this time, I’ve written hundreds of articles covering automotive trends and developments both nationally and internationally.