Kevin Ryan, BI Senior Industry Analyst (Insurance), commented: “Insurance pricing fell in Q3 for supercars having risen in Q2; it doesn't reflect either inflation or the expensive technology that's boosting UK auto-claims costs for family automobiles and supercars. This October, our analysis shows a Aston Martin DB9, worth £75,000 and parked on the street, can be insured by a 50-year-old living in central London for as little as £960 a year (down 34% year-over-year and 9% since July), according to Confused.com. Insuring a similarly valued Ferrari costs £653 (down 51% year-over-year), a McLaren costs just £959 (down 32% year-over-year). A Skoda Yeti, worth £10,000, can be insured for as little as £381 (average of 66 Confused.com quotes, £1,525), down 21% since July. This is no supercar, yet Warrantywise paid a £5,000 claim in 2018 to repair a faulty fuel system.”
Association of British Insurers' (ABI) statistics show the UK auto-insurance industry made an underwriting loss between 1994-2015 a period of 21 years. Since then EY estimate an underwriting profit has only been achieved four times. Given the potential cost of replacing some vehicle parts and insured hull values, we deem UK auto-insurance premiums remain inexpensive. In the Aston Martin-Skoda example, the cheapest Aston Martin premium of £960 would take 78 years to pay for the total £75,000 replacement cost. The cheapest Skoda premium of £381 would take 26 years to pay for the lost vehicle's £10,000 price tag. Pound for pound, the Aston Martin is cheaper to insure. These premiums aren't keeping pace with the high single digit claims cost inflation being seen by most insurers. The ABI saw premiums fall 2% in Q2.
Claims costs have been rising steadily in recent years and it's likely this will continue for a variety of reasons. Vehicles are getting more expensive to repair as they become increasingly technically sophisticated. All new vehicles have Advanced Driver Assistance Systems (ADAS) fitted and this makes repairs more costly. Supply chain squeezes and weak sterling have also piled on costs. All insurers are experiencing claims inflation and Direct Line has stated this is running at "high single digits". We would argue that this isn't anything new; the CPI of spare parts has been rising sharply since at least 2017. The Association of British Insurers reported an 18% rise in auto claims cost in Q2 with £2.9 billion paid out.
Kevin Ryan, BI Senior Industry Analyst (insurance), added: “The average annual cost of UK auto insurance decreased to £861 in Q3 compared with £882 in 2Q (£924 in 3Q23), a 7% year-over-year fall with the Confused.com's car-insurance price index showing a trend that has flatlined. The average premium, which last peaked at £847 in Q217 before the new Q423 high of £995, has moved lower. The key issue is that premiums have struggled to revisit 2011's last absolute peak of £857, while the UK CPI transport maintenance and repairs costs index is up 3% year-to-date (September data), 36% since 2017.”
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