Over the past year, motor insurance premiums have seen a notable decline. While industry insiders anticipated that motor insurance rates would increase more than those for travel, pet, private medical, and life insurance in 2024, the actual outcomes have diverged from these expectations.
A GlobalData poll conducted on Verdict Media sites in Q2 2024 revealed that 22.7% of industry professionals identified motor and home insurance as the sectors likely to experience the most substantial premium increases in the coming year. This outlook was influenced by an inflationary environment characterised by rising repair costs, supply chain disruptions, and an uptick in both the frequency and severity of claims. Factors such as high inflation driving up claims settlement costs and sharp increases in vehicle parts and repair expenses due to global supply shortages contributed to this sentiment.
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However, the latest general insurance price index from Pearson Ham Group indicates a contrast to these earlier predictions. The index shows that the average quoted motor insurance premium has actually decreased by 17% over the past year, marking a significant reversal in trend.
This decline in motor insurance premiums can be attributed to several factors, including a reduction in inflation and heightened competition within the industry, leading to aggressive pricing strategies. Despite the drop in premiums, the industry still grapples with elevated claims costs, with a 13% increase in claims paid in 2024 compared to the previous year, according to the ABI.
In this challenging economic climate, insurers may be focusing on customer retention by lowering premiums to maintain or expand their market share. Ultimately, the disparity between expectations and reality underscores the volatility of the motor insurance market and the intricate relationship between economic conditions, claims trends, and competitive dynamics.
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By GlobalData
