The Association of British Insurers (ABI) says it is exploring various ways to tackle the rising cost of motor cover.
The association has outlined steps that it believes the industry, Government or regulators could initiate or improve on.
This includes the industry doing more on transparency around which vehicles are more costly to insure, to help people make more informed choices.
The ABI said it is exploring a partnership with the police to help the recovery of stolen vehicles from ports, as well as working with vehicle manufacturers, the Mayor of London’s office and the National Police Chiefs’ Council to find more ways to prevent vehicle thefts.
Continuing to crack down on fraud and uninsured driving will reduce the costs borne by law-abiding drivers for their insurance, the association said.
The average price paid for motor insurance in the final quarter of 2023 was around a third, or £157 in cash terms, higher compared with a year earlier, according to the ABI’s figures.
Between October 1 and December 31 2023, the average price paid for private motor cover was £627, up from £470 during the same period a year earlier.
The ABI also highlighted insurance premium tax (IPT) as a source of costs, saying it adds £67 to the average policy. IPT is a tax on insurers which feeds into the costs customers pay.
It also plans to commission research into the impact of various social policies focused on helping low-income households manage their insurance costs. This will be undertaken in collaboration with its Consumer Advisory Group, which is made up of consumer champions and organisations including Which?, Citizen’s Advice and Fair by Design.
The steps have been announced in the lead up to the publication of the ABI’s wider financial inclusion strategy, which aims to help consumers better understand and access insurance, protection and long-term savings products.
The ABI said its members are also committing to better explain how insurance premiums are calculated and the steps that customers can take to reduce costs. This includes more detailed explanations at renewal, but also when buying policies.
Longer repair times, higher repair costs, and the rising price of replacement vehicles have been adding to the cost of premiums.
Rising repair costs are due to a mixture of the price of labour, energy costs, and vehicles becoming more sophisticated, with electric vehicles requiring more specialist expertise to repair.
Recent research from consumer group Which? indicated that motor insurance customers who buy cover monthly can end up paying hundreds of pounds more than those who pay for policies annually.
The ABI said that premium finance, which allows consumers to pay monthly instead of needing to pay in one go, is another focus for it as part of its package of steps on motor insurance affordability.
Mervyn Skeet, director of general insurance policy said: “We will continue to do what we can under our new strategy to help consumers access the products that are integral to financial wellbeing and play a key role in the nation’s financial resilience.”
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