Average premiums lowest for seven years

The average price paid for motor insurance in the first quarter of 2022 fell by five per cent to its lowest level in nearly seven years.

According to the Association of British Insurers Premium Tracker, the average price paid for comprehensive motor insurance was £416, the lowest average premium since the third quarter of 2015.

The fall follows the introduction in January of the Financial Conduct Authority new pricing rules, which ban insurers offering cheap prices to new customers to attract them and then raising premium prices for customers renewing policies.

The ABI found that the average premium paid for a new policy in the first quarter was £105 higher than for renewals. The average premium for new policies was £480, up £34, on the same quarter in 2021, while the average for renewed policies, at £375, fell by £55.

James Dalton, director of general insurance policy at the ABI, said: “Like other sectors, motor insurers face rising costs. While it is going to be extremely challenging for these to be absorbed, insurers are doing all they can to keep prices as competitive as possible as millions of household cope with the cost of living crisis.

“As the FCA has said, the impact of their reforms to pricing rules introduced on 1 January this year could lead to some consumers paying higher prices if they used to benefit from significant new business discounts. For some it could still pay to shop around for the policy that best meets their needs.”