Motor insurance companies paid out a record £1.1m in car insurance claims every hour last year, according to the industry’s UK trade body.
A staggering £9.9bn was paid out to motorists across 2023, the highest annual figure since the Association of British Insurers (ABI) began collecting data.
The figure was up 18 per cent on the £8.4bn paid the prior year and came alongside a 10 per cent rise in the overall number of settled claims, to 2.3m.
Insurers are grappling with soaring vehicle repair costs amid inflation and high energy prices. The average cost of repairing a vehicle in the UK jumped nearly a third to £6.1bn, and the ABI said some garages had reported 300 per cent rises in their energy costs.
Payouts for vehicle theft and the average theft claim were also at record levels, with £669m paid out over the year, up 23 per cent.
Jonathan Fong, general insurance policy manager at the ABI, said: “Significant and sustained cost pressures faced by insurers, such as a 31 per cent rise in repair costs over the last year, have impacted on the cost of cover. Despite this, insurers continue to do all they can to ensure competitively priced motor insurance.”
Adjusting for inflation, the average total cost of a settled car insurance claim increased by 23 per cent to £4,300. Average premiums, also adjusted for inflation, rose by eight per cent to £543.
The UK’s biggest insurers have warned that 2023 was one of the most challenging years in decades, with the likes of Admiral and Direct Line reporting a decline in profit.
There has been some light at the end of the tunnel in recent months. Two closely watched indexes revealed premiums have begun falling for the first time in years since the final quarter of last year.
A “month-on-month” decline since November has left the average motor insurance premium at £892 as of February, down from £951 in November, according to Compare the Market analysis. Research from Consumer Intelligence has also shown a fall in premiums.
“There was a lot to recover but I think we are in a very different situation now,” Milena Mondini de Focatiis, Admiral’s chief executive told the Financial Times in March, adding the firm had even put through a “small price decrease” in recent months.