Why car and home insurance costs are on the rise despite falling inflation rates
Motorists and homeowners across the UK have been left reeling by the significant increases in their insurance premiums, even as inflation rates have plummeted. According to data insights company Consumer Intelligence, the average quoted price of home insurance skyrocketed by 41.6% in the 12 months leading up to April, with quoted premiums rising by a staggering 68.8% since February 2014.
In London alone, householder saw their home insurance quotes surge by 49.9% in April, closely followed by residents in the South East and East of England experiencing hikes of 45.8% and 41.9%, respectively. These increases come at a time when inflation has dropped to 2.3% in March, the lowest in nearly three years.
On the other hand, car insurance premiums have also seen a steep 25% increase in 2023 compared to the previous year, with the average premium now sitting at £635. The ABI attributes these rises to escalating repair costs, longer repair times, and the rising sophistication of vehicles, particularly electric cars.
Insurers are grappling with the pressure of increased costs, with repair expenses rising by 32% in the third quarter of last year alone. As a result, they are spending more on claims and costs than they are collecting in premiums, leading to the surge in insurance prices for motorists and homeowners alike.
The Financial Conduct Authority (FCA) has expressed concerns over the rising insurance costs, highlighting the disproportionate burden it places on consumers. With bad weather events like storms causing significant damage to homes and leading to increased claims, the insurance industry is facing challenges in managing costs effectively.
As motorists and homeowners continue to grapple with rising insurance premiums, it is clear that cost pressures and external factors are driving the surge in prices. While efforts are being made to address these issues, consumers are advised to shop around for the best deals and consider their options carefully to mitigate the impact of rising insurance costs.