[Skip to content]

Sign up for our daily newsletter
The Actuary The magazine of the Institute & Faculty of Actuaries

Car insurance prices rise three times faster than inflation

UK car insurance prices increased by 5% in 2019, rising three times faster than the rate of inflation for the year, research by Willis Towers Watson (WTW) has found.

Challenging time for car insurers ©Shutterstock
Challenging time for car insurers ©Shutterstock

This included a 4% rise in the final quarter of 2019, with drivers now paying £815 for insurance on average, some £41 more than they were this time last year.

This brings the average price close to the peak of £858 seen in 2011, and marks the fifth quarter of increasing and decreasing premiums, with insurers still uncertain about pricing.

WTW’s UK head of P&C Personal Lines Pricing, Graham Wright, said timing challenges with implementation of the Civil Liability Bill were partly responsible for the uncertainty.

“That said, the increases have tended to outweigh the decreases and the recent challenging environment for reinsurance renewals on motor excess-of-loss will have done nothing to help insurers keep costs under control,” he added.

The WTW findings are based on price data compiled from almost six million customer quotes per quarter, published in collaboration with Confused.com.

The cost of comprehensive car insurance over the last 12 months increased across all regions in the UK, with motorists in inner London being hit with the biggest annual rise of 8%.

These drivers saw their average premiums rise from £1,169 to £1,260, while the smallest annual increase of 1% was seen in the Scottish borders where average premiums reached £615.

The South West is now the cheapest region for car insurance, where it costs just £595 on average, while East London is the most costly postcode, with drivers typically paying £1,443.

The West Midlands joins Manchester and Merseyside as the only regions outside of the capital where prices exceed £1,000.

As for demographics, the findings show that male drivers aged 17 to 20 are still paying the most, with their premiums increasing by 6% last year to £2,369 on average.

Female drivers aged 26-30 experienced the biggest rise in premium prices last year, increasing by 9% to £823.

"Many of the challenges observed throughout 2019 will persist in 2020, as cost pressures remain from expensive vehicle repairs, theft claims, last summer’s discount rate change, Brexit-related challenges and IPT increases," Wright added.

Sign up to our free newsletter here and receive a weekly roundup of news concerning the actuarial profession