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 between April and June, marking a £60 decrease from the same period in 2024. Adjusted for inflation, this represents an £81 drop year-on-year. This decline follows a previous reduction in Q1 2025, where premiums fell by £40. Despite the drop in premiums, insurers settled 669,000 claims in Q2, a 5% increase from the first quarter. The ABI reported that its members paid out £3.1 billion in claims during this period, maintaining high payout levels. Repair costs and theft claims contributed significantly to these expenses.
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Why It's Important?
The reduction in motor insurance premiums offers financial relief to drivers, potentially easing household budgets. However, the persistent high cost of claims, particularly for repairs and theft, continues to pressure insurers. The ABI has called for government support to address these issues, including investment in repair sector training and road safety improvements. The insurance industry is also urging the government to resist increasing insurance premium tax in the upcoming Autumn Budget. These measures are seen as crucial to maintaining affordable insurance rates and ensuring the industry's sustainability.
What's Next?
The ABI is advocating for strategic government interventions to support the insurance industry. This includes enhancing training for the repair sector and improving road safety measures. The industry is also focused on maintaining pressure against potential increases in insurance premium tax. These efforts aim to stabilize insurance costs and address the factors driving high claims expenses.
