What's Happening?
The average cost of motor insurance in the UK decreased in the second quarter of 2025, despite insurers paying out billions in claims. According to the Association of British Insurers (ABI), the average premium was £562, down from £622 in the same quarter of 2024. This marks a real-terms decrease of £81 year-on-year. The decline in premiums comes as insurers settled 669,000 claims in Q2, a 5% increase from the previous quarter, with payouts totaling £3.1 billion. High repair costs and theft claims contributed to the elevated claims costs, with theft claims averaging £11,800.
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Why It's Important?
The reduction in motor insurance premiums offers relief to drivers, especially as household finances remain under pressure. However, the persistent high claims costs highlight ongoing challenges for the insurance industry. The ABI has called for government support to address these pressures, including investment in repair sector training and road safety improvements. The decline in premiums, despite high claims costs, suggests insurers are managing to balance payouts with competitive pricing, which could influence consumer choices and market dynamics in the insurance sector.
