Insurance policies

New car insurance policies £129 more expensive than renewals as cost of living bites

The average annual price paid for car insurance rose by £5 in the second quarter of 2022. Photo: Getty

The average policy for new car insurance customers in the UK jumped in the second quarter of the year as Cost of life the pressures are starting to squeeze households, according to a UK industry body.

New data from the Association of British Insurers (ABI) showed that the average premium paid for a new policy over the period was £129 ($156) higher than for a renewed policy.

Average premiums for new policies increased by 3% to £500 and average premiums for renewed policies increased by 0.5% to £371 over the three months, according to the ABI.

Monday’s figures indicate the typical price for private car insurance has risen to £419, and insurers are finding it increasingly difficult to absorb mounting inflationary pressures.

This was up £5, or 1.3%, from the previous quarter, but still £11 lower than the same quarter in 2021.

In January, supposedly price on foot – a controversial practice where customers signed up for a discount and then faced undue price increases over time – has been banned in the UK.

While the ABI said it was still too early to fully assess the impact of the ban, it added that the figures indicated an increase in the difference between new and renewed premiums.

The average new policy was £105 more expensive than the average Q1 renewal.

Read more: Direct Line raises insurance prices amid rising inflation and economic uncertainty

Callum Tanner, ABI Director, General Insurance, said: “Insurers understand that these are difficult times for many households facing rising costs of living.

“While, like many other industries, auto insurers are themselves facing higher cost pressures, which are becoming increasingly difficult to absorb, they will continue to do all they can to maintain the car insurance at the most competitive prices possible.

It comes as Direct Line said last week that it had raised prices by 15% for new customers in the six months of the year.

The insurer added that it would increase insurance premiums in response to the effects of soaring prices for everything from used cars to spare parts.

Chief executive Penny James said the insurer expects auto claims inflation to rise by around 10% in 2022, adding that “our rate increases…need to reflect that.” Rates increased by 15% in the first half.

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