Lower car insurance expenses see sharpest decline, bringing relief to motorists nationwide
Car Insurance Premiums in the UK See Significant Drop
Good news for drivers in the UK as car insurance premiums have experienced a notable decrease, according to data from the Association of British Insurers (ABI). The average cost has fallen by approximately 10% over the past year, marking one of the biggest annual drops since 2013.
This decline can be attributed to several factors. Strong competition among insurers is likely playing a role, as it encourages more competitive pricing. Additionally, a decrease in the number of claims could also contribute to lower premiums, as insurers may adjust their pricing based on reduced risk. Any recent regulatory changes or decreases in costs associated with claims handling might also influence premium rates.
The drop in premiums can lead to cost savings for many motorists. However, it is still essential for drivers to compare insurance quotes annually to avoid overpaying, as prices can vary significantly between insurers.
The market is also seeing a rise in demand for flexible, short-term insurance options, providing additional choices for drivers.
However, insurers are still facing a battle to keep claims down, even with the drop in premiums. The value of claims settled from April to June 2025 is £2.1 billion, an increase of £100 million from the first three months of 2025. The number of claims settled by insurers from April to June 2025 was 669,000, a 5% increase from the first three months of 2025 (639,000 claims).
Modern cars have complex electronics such as advanced sensors, making them more difficult and costly to repair. Increased labor costs, inflationary pressures, and component shortages are also contributing to soaring repair charges. The ABI is encouraging the government to invest in training for the repair sector, improve road safety, and hold firm against any rise in insurance premium tax in the autumn Budget.
Despite the overall drop, premiums are still far higher than what they were five years ago, during the pandemic. The government is being urged to support the industry, and Mark Shepherd, head of general insurance policy at the ABI, is encouraging the government to take action to further reduce costs and ensure affordable car insurance for all drivers.
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