The Association of British Insurers (ABI) has told its members to keep monthly charges for motor insurance “reasonable” following complaints about a sharp rise in premiums.
An investigation by the consumer magazine Which last week found that car owners are being hit with eye-watering annual percentage rates (APR) of nearly 40 per cent when paying for their insurance monthly
The Assocaition’s Premium Finance Principles underline what fair practice should look like and revolve around five elements: Transparency, affordability, fair value, proportionality and accountability.
Motor insurance costs have been a particular focus after claims inflation led to the cost of premiums rising 25% in 2023. EY estimates that in 2023 for every £1 paid in premiums, insurers incurred £1.14 in claims and expenses.
Mervyn Skeet, Director, Head of General Insurance policy said:
“The principles announced today are one of a raft of actions we are taking to tackle the cost of motor insurance, which we know is putting pressure on households, especially those on lower incomes. We are doing all that we can within our reach asa trade body for insurers and hope that other organisations involved with premium finance follow our lead.”
“We’re also looking to investigate policy steps that could help low-income households specifically, as well as deliver on our broader Roadmap to tackling costs. This includes a call on the government to reduce insurance premium tax (IPT), especially when they are bringing in record tax revenues as a result of higher prices.”
Founder of comparison site Quotegoat.com, Michael Foote said:
“The Association of British Insurers has finally taken meaningful steps to ease the financial strain on drivers who can’t afford to pay for their insurance in one lump sum. Insurers should recognise the challenges faced by those unable to pay upfront and opt for paying monthly – taking advantage of their situation is simply unacceptable and I hope providers found to be doing so will face consequences.
“Make it a habit to compare the price of your car insurance every year using comparison sites – never automatically take the first price you’re offered to automatically renew – it’s seldom the best price you’ll get. If you find a better offer elsewhere, don’t be shy about negotiating with your current provider. It’s about time we hold our car insurance providers to account”.
