Labour is calling for an investigation into the “out of control” rise in car insurance costs, which has affected millions of drivers in the past two to three years.
The insurance industry attributes the sharp increase to a surge in claims costs, driven by the rising prices of car parts and second-hand vehicles. Despite these claims, many industry insiders assert that motor policies have been loss-making. Louise Haigh, the Shadow Transport Secretary, has urged the Financial Conduct Authority and the Competition and Markets Authority to investigate the sector.
Haigh emphasized, “Car insurance is a legal requirement and an essential service, not a luxury. Labour will not stand by as drivers are burdened with exorbitant insurance costs. We will urgently call in regulators to address any unfair practices and provide transparency on the reasons behind these soaring costs for consumers.”
Consumer Intelligence reports that the average quoted price of car insurance surged by 56.4% in the year leading up to February. During this month, most drivers received annual quotes ranging from £500 to £749. Although this figure is lower than the 67.2% increase recorded by the end of November, it remains the third-highest annual rise since data tracking began in 2012.
Some insurers are starting to see a recovery in profits. Admiral, the UK’s largest motor insurer, reported nearly £443 million in profits last year, a 23% increase from the previous year. Admiral’s chief executive, Milena Mondini de Focatiis, noted in March, “Over the past couple of years, the industry faced unprecedented inflation and a cost of living crisis in the UK. We maintained pricing discipline and proactively adapted to these trends.”
Aviva also recently reported improved profit margins in its UK insurance market. Motor and home insurer Hastings announced a rise in profits to £32 million in the first quarter of this year.
The Association of British Insurers stated, “The industry is committed to taking action. Insurers are contending with rising repair costs and other uncontrollable factors. A study by EY estimated that for every £1 motor insurers received in premiums in 2023, they paid out £1.14 in claims and operating costs.”
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