Car insurance is the latest household expenditure to skyrocket, with disgruntled drivers saying that prices are increasing by up to 70% when their policy is up for renewal.
While fuel prices have fallen from record highs set in 2022, the latest inflation bulletin from the Office for National Statistics (ONS) revealed a new source of financial distress, with the cost of auto insurance rising 43.1% in the previous year.
Some drivers, however, are reporting an even worse scenario than the official statistics shows, with Direct Line and Saga customers stunned by the size of price rises in their renewal contracts for this year.
Angry Direct Line customers have taken to posting on the Trustpilot website to complain about increases ranging from about 50% to more than 75%. One reviewer said her renewal price was up 75% on 2022 for no apparent reason, adding: “How can any company justify that?”
One driver informed the Guardian that when her Saga over-50s vehicle insurance renewal quote arrived, the price had risen 77% to £2,044 despite the fact that “nothing had changed.” She left the insurer after discovering a better offer elsewhere.
Customers’ large increases do not yet correspond to the industry’s own data. According to the Association of British Insurers (ABI) quarterly car insurance premium tracker, the average price paid for motor insurance in the first three months of 2023 was £478, which is 16% more than in 2022.
Based on the ONS data, the next installment is anticipated to show a stronger growth; nevertheless, the figures track various things. The ONS collects quotes, but the ABI examines the rates that customers actually pay.
According to an ONS spokeswoman, the most noteworthy difference is how consumers save money by decreasing add-ons and how the ABI treats this.
“If a customer removes an add on or changes the excess on their policy the ABI treats this as a change in price, whereas the ONS treats this as a change in the quality of the insurance being offered,” they said.
The ABI said it collected data “that looks at the price consumers pay for their cover for both new and renewed policies. We understand that other collections look at prices quoted and are currently working with the ONS to explore this further.”
It said insurers faced extra costs that were becoming “increasingly challenging to absorb”.
Customers can obviously choose another insurer if they are dissatisfied with their renewal offer, and high renewal quotations emphasize the necessity of comparison shopping. That is exactly what many Direct Line customers who posted on Trustpilot indicated they were doing.
When asked about price increases, Direct Line blamed “higher costs”. It added: “We always encourage our customers to shop around for a range of quotes before renewing their insurance each year.”
Saga said it was experiencing “high levels of claims inflation”, with spare parts, such as microchips and semiconductors, more expensive than before. “Not only that, but they also take longer to arrive, which extends the time cars are out of action after a claim, and then extends the time claimants need a courtesy car for.”
According to insurance brokers, the number of claims has climbed this year, driving expenditures above premium income and pressuring firms to raise prices.
According to an EY analysis, a dramatic increase in the cost of used automobiles and vehicle parts during the Covid epidemic, as well as higher costs across the car maintenance sector, have wiped out margins.