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Friday, January 27, 2023

London motorists hit with sharpest uptick in car insurance costs as UK premiums surge

Motorists are now paying £100 more for car insurance than last year, according to new research which shows premiums have increased at their sharpest rate in six years.

Car insurance premiums have increased 19 per cent over the past 12 months, meaning motorists now pay average sums of £629 to insure their vehicles, Confused.com’s Car Insurance Price Index shows.

The £100 uptick in premiums comes as insurance costs increased for five quarters in a row, finishing with a £43 increase in the final quarter of last year.

The surge came as motorists across all regions of the UK experienced double digit increases in their insurance costs.

Fast-paced inflation throughout the UK economy has driven up the costs insurers face in fulfilling claims in a shift that has in turn seen premiums surge.

New rules from the UK’s Financial Conduct Authority (FCA) banning insurers from charging more to loyal customers have also hit insurance companies’ balance sheets.

Tim Rourke, head of pricing at insurance adviser WTW, explained insurers’ efforts to maintain their margins in the face of “supply chain disruption, labour shortages, lack of raw materials and increasing food, fuel and energy prices” will see premiums continue to rise.

However, London motorists took the largest hit of any region in seeing their premiums surge by rates of 22 per cent to heights of £1,008 per year.

More specifically, motorists in the London boroughs of Sutton and Enfield experienced the sharpest annual increases in seeing their insurance bill rise by rates of 25 per cent.

Drivers in west central London now face higher car insurance costs than anyone else in the country, in paying average sums of £1,233 per year.

By contrast, motorists in the Manchester and Merseyside areas saw the slowest rates in the country, in seeing their premiums increase by just 16 per cent, the research shows.

Rourke noted that “rising interest rates, along with the prospect of falling inflation over 2023 will help insurers’ overall profitability”.

“At the same time, the wider economic environment of falling household incomes, cost of living pressures and volatility in financial markets is expected to affect demand significantly across insurance lines.”

The uptick comes after the FCA warned insurers not to “undervalue” cars or other insured items when settling claims.

The watchdog raised concerns insurance companies are offering customers prices lower than their vehicles’ fair market price.   

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