Motor insurance premiums have soared to their highest levels since records began, according to research from the Association of British Insurers (ABI).
Over the last year, the average price paid for car insurance rose 21 per cent to £511, the highest since the ABI began collecting data in 2012.
The ABI said that “sustained cost pressures” faced by insurers had resulted in the upward trend, as inflation bumps up the price of vehicle repairs and rising labour rates and energy costs bite.
Vehicle repair costs leapt by 33 per cent over the year to a record high of £1.5bn, alongside an increase in the cost of replacement parts for the most popular cars of between 12 and 21 per cent.
One insurer also told the ABI they had witnessed 40 per cent rise in labour rates between June 2022 and January this year.
In total, insurers paid out £2.4bn in all motor insurance claims for theft, vehicle repairs, and personal injury – up 14 per cent on the the same quarter last year.
Mervyn Skeet, the ABI’s director of general insurance policy, said: “These continue to be tough times for many motorists and motor insurers alike.”
“With many families facing higher cost of living bills, no one wants to see the cost of their motor insurance rise. Insurers remain determined to ensure that motor insurance remains as competitively priced as possible, but this has become increasingly challenging, given the continued rising costs that they are facing.”
Younger drivers are likely to be more affected by the rise, the association said, with the average premium for new or renewed policies up £21 and £36 respectively.
Some of the biggest insurance companies have had their margins significantly impacted by claims inflation this year, including Admiral and Direct Line.
In a report in June, consultancy EY said that the insurance market had experienced its worst performing year in a decade in 2022.
The ABI’s analysis is taken from 28m motor insurance policies over the past year, and represents the most accurate picture of what UK motorists are actually paying for their cover.