PwC comments on new government taskforce tackling car insurance premiums

Mohammad Khan, head of general insurance at PwC UK, comments:

“As car insurance is a legal requirement, taking steps to ensure the market is fair, competitive and affordable is the right thing to do. 

“There are a number of reasons motor insurance currently costs more in the UK and why car insurance rose more than in other European countries over the last year and a half. These include supply chain-led claims inflation - which has been as high as 30% per annum and much higher than CPI - and tariff costs on the products and services required for car repairs - the majority of car parts come from outside of the UK, making them susceptible to the rising price of fuel required to import goods by ship seen over the past few years. The UK has also seen several increases in the Insurance Premium Tax in recent years, which has been added on to bills. 

“Waiting times for injury treatments play a part - a longer wait to be treated for an injury sustained in an accident typically means higher bills for insurers and a resulting increase in premiums. Also, it is taking longer for complicated insurance claims that go to court to be settled due to delays that we are seeing in the court system. Claims that take longer to settle cost more. Another factor is supply and demand for mechanics and engineers, which lengthens repair times and impacts claim and premium costs. 

“All of these reasons underline the importance of taking a holistic approach to identifying what changes can be made to improve outcomes for drivers, so this taskforce should be welcomed.

“As well as considering these factors, we would encourage the taskforce to consider the higher cost of the repairability of modern and electric vehicles, which are increasingly equipped with advanced technology and safety features, and which has an impact on customer bills. For example, electric vehicles can be more expensive to repair than their petrol and diesel equivalents which further increases insurance premiums.

“There was good news for drivers in Scotland and Northern Ireland last month when the personal injury discount rates in these nations changed. These rates impact expected losses for insurance companies and, therefore, the level at which they set premiums for their wider customer base. We calculate the new rate will mean motor insurance premiums should fall by an average of £60 for drivers in Scotland and £90 for Northern Irish drivers. A new rate for England and Wales is expected by January, and some insurers are already pricing in a change, meaning premiums should continue to fall. 

“In the meantime, we’re seeing competition heating up in the motor insurance market, with some players looking to increase their share of the market, which should ease some of the pressure that has been building on prices as insurers compete for customers. Without the impact of Ogden or the taskforce we estimate that rates will fall by 5% in 2025, which could be worth up to £50 to an average driver or well over £100 for drivers aged under 30 or with more expensive cars.”

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