- High auto insurance premiums.
- Soaring repair and energy costs.
- Calls for tax reduction.
According to the Association of British Insurers, a reduction in the tax on premiums in the government’s impending autumn statement could alleviate some of the additional financial strain.
The industry association reports that annual auto insurance premiums have reached an all-time high due to increased expenses, such as those for fuel and maintenance.
Comparing the third quarter of this year to the corresponding period in 2022, the paid-for average comprehensive cover increased by 29%, according to the Association of British Insurers (ABI).
The average amount increased by 9% from April to June, reaching £561.
It reflected ongoing increases in insurers’ expenses, which surged last year, according to the ABI.
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The organization cited a study by the accounting behemoth EY, which revealed that motor insurers paid out £1.10 in claims and operating expenses for every £1 in premiums received last year.
Since then, the financial results of insurers in 2023 have shown little relief from this pressure.
Rising Costs and Insurance Premiums
During the third quarter, paint and spare parts increased in price by 16% and 11%, respectively, year-over-year, according to insurers.
The report by the ABI indicated that energy costs were the primary driver of a 46% increase in other expenses. They included supply chain and repair delays, as well as the fact that repairs became more costly due to advancements in automobile technology.
In addition to posing an additional financial burden for businesses and drivers amidst the ongoing cost of living pressure, escalating premiums put an increasing number of motorists at risk of operating without insurance.
The Motor Insurers Bureau estimated that one million of them were in circulation during the previous year.
In addition, these drivers enhance the premium risk.
The ABI stated that a reduction in the rate of Insurance Premium Tax in the impending autumn statement mini-budget could assist the government in alleviating the financial burden.
At the moment, it constitutes £60 of the mean premium.
Mervyn Skeet, the ABI’s director of general insurance policy, expressed, “We acknowledge that households, who are already contending with escalating expenses in other domains, will be uneasy with an additional quarter of escalated auto insurance premiums.
Despite encountering significant cost increases beyond their control, insurers persist in making every effort to maintain motor insurance at a competitive price.
“We are bringing together representatives from across the industry to discuss matters, including vehicle security and safety,” he continued. But in order to provide drivers with an immediate cost reduction, the government could implement a reduction in the Insurance Premium Tax.
“At the time of your insurance renewal, we strongly advise that you shop around to find the most suitable policy.
Conversely, prioritize a policy that fulfills your requirements over cost alone. Consult your insurer if you are having difficulty paying your premium; they may be able to assist you.
