Average car insurance now so high people ‘have stopped claiming’

THE average annual car insurance bill has hit almost £1,000 as MPS warned that premiums risked becoming so expensive that drivers are put off making claims.

Insurance bosses spoke at a Treasury select committee yesterday to explain the surging cost of car insurance, for which quotes have risen by 43 per cent in the past 12 months, according to research by Confused.com.

The data showed that the average cost of taking out a new car insurance policy in the UK is now £941, having dropped marginally from a high of £995 at the end of last year.

Senior MPS warned that spiralling costs put drivers off making smaller claims, to avoid having to pay an excess on top of increasingly unaffordable cover. Drivers also risk losing their “no-claims” bonus if they make a claim.

Anne Marie Morris, a Conservative committee member, said: “Clearly one is very concerned as to the impact of any change on the willingness of individuals to claim under the policies. It would be disastrous if they felt they couldn’t.” She added there were “plenty of individuals” who might opt not to claim for damage on their vehicles as a result of higher prices “when you are talking about a very small claim”.

Siobhain Mcdonagh, a Labour committee member, said: “It is a very ferocious market with older customers being excluded by having to pay online. These insurances are not optional extras, they are legal requirements.”

In evidence submitted to MPS, insurance firms blamed added supply chain costs brought on by the pandemic and war in Ukraine, as well as price inflation on parts and labour for the higher costs.

Depending on the severity of an accident, drivers can expect car insurance to increase by about 20 to 50 per cent after making a claim, according to comparison website Compare the Market. An accident where it was not the insurance payer’s fault is likely to put up premiums by less than £10 each month, according to motoring advice site Car. co.uk. Data from Confused.com shows that drivers aged between 22 and 35 were caught out by the rising cost of premiums and face paying £1,930 on average, up by £667 since 2019.

Those aged between 55 and 65 were on average quoted over £100 more than their premiums of six years ago.

Charlotte Clark, of the Association of British Insurers (ABI), said: “These are competitive markets. If you are decreasing the cost for somebody it is going to be increased somewhere else.

“You would expect that to be level so we wouldn’t have expected there to be increases across the board in terms of average, but that some people would have benefited and some people would have lost out.”

Matt Brewis, of the Financial Conduct Authority, said: “The insurance sector has not done a particularly good job of forecasting inflation and the impact that it will have on their supply chains and protecting those parts of their business.”

David Mendes da Costa, who is responsible for consumer policy at Citizens’ Advice, said: “The people who are coming to us for help are having to make “impossible choices” with their finances.

“We’ve had people come to us to make food bank referrals because of the rising cost of insurance.”

The ABI was approached for comment.