Insurers Continue to Charge Different Premiums for the Same Vehicle, Despite Blaming Rising Costs

Motorists in the UK are facing significant increases in the cost of motor insurance, with insurers blaming inflation and rising vehicle repair costs and personal injury claims. However, recent research has revealed that insurers are still quoting vastly different premiums for the same vehicle and driver, casting doubt on the reasons given for the price hikes.

According to the Association of British Insurers (ABI), the average insurance premium paid by motorists between April and June this year was £511, a 21% increase compared to the same period last year. Renewals averaged at £471, while new policies reached £566. Consumer Intelligence reported that quoted prices increased by 48% in the 12 months leading up to June 2023.

The ABI attributed these increases to several factors, including the £2.4 billion insurers paid out for vehicle parts and repairs, which have risen by 33%. The cost of replacement cars has also increased by 29%, and personal injury claims were 14% higher in the first quarter of this year compared to the same period last year.

However, Autocar’s research has found that despite these universal increases, insurers are still offering vastly different premiums for the same vehicle and driver. For instance, a Volkswagen Golf insured by a 63-year-old generated 129 quotes ranging from £340 to £4464 on Compare the Market. This suggests that insurers are selectively choosing their business, rather than being solely driven by inflationary pressures.

Insurance expert Tim Kelly believes that insurers are increasing premiums to price themselves out of certain areas of the market for business reasons. He also points out that insurers’ investment returns have declined, making them more exposed to the effects of inflation. Instead of filling the revenue gap with profits made during the COVID-19 pandemic when claims fell due to reduced driving, insurers are passing all costs onto motorists.

Ursula Gibbs, director at Compare the Market, responded to Autocar’s research by advising drivers to compare prices online, where they could save up to £457 by switching providers ahead of renewal. However, the pressure on premiums was meant to be alleviated by tighter rules on whiplash claims introduced in May 2021, which were expected to save motorists £1 billion per year. Yet, premiums have continued to rise since then.

The Financial Conduct Authority (FCA) implemented rules on motor insurance pricing in January last year to ensure existing policyholders no longer paid higher renewal premiums than new customers. However, critics argue that these rules have prevented people who used to shop around from securing low-price renewals. The FCA acknowledges that some customers may no longer access the lowest premiums but maintains that the rules have had a substantial net benefit on the average premium paid by customers as a whole.

In addition to rising repair expenses, insurers are also facing increased costs for courtesy cars, leading them to write off vehicles they would have previously repaired. Vehicle theft claims are also on the rise, with some insurers increasing the cost of cover for certain vehicles or refusing to insure them altogether. Fraudulent claims contribute to this increase, and inadequate police response to vehicle theft is partly to blame.

The cost of living crisis is believed to be behind an increase in fraudulent theft claims. According to the National Crime Agency (NCA), vehicle thefts rose 19% to 110,739 cases last year. Chris Edwards from QuestGates, a leading loss-adjusting company, believes that a significant proportion of these claims are fraudulent and made by individuals facing financial difficulties. Techniques such as voice stress analysis help uncover these fraudsters.

To save money on car insurance, experts recommend adding an experienced driver who will also drive the car, accurately describing your job (as certain descriptions are deemed higher risk), considering a black box or telematics policy, and exploring pay-per-mile policies for low-mileage drivers.

In conclusion, despite insurers blaming rising costs for the sharp increases in motor insurance premiums, research shows that insurers are still charging vastly different prices for the same vehicle and driver. This raises doubts about the reasons given for the price hikes and puts some motorists at risk of paying significantly more for their insurance.