What will Labour’s victory mean for car insurance premiums?
Insurance Times
The leading information, analysis and insight brand in UK general insurance, part of Newsquest Specialist Media Ltd
By James Cowen, News Editor
Many of us would have been glued to our TV screens on the evening of 4 July 2024 as the results of the latest general election were revealed.
As Big Ben struck 10pm, an exit poll of 20,401 people in 133 polling stations was published across news outlets and one thing was clear – The Labour Party was going to win by a landslide.
And so it did, with the party securing 412 seats, while the Conservatives only managed to pick up 121.
The results put an end to 14 years of Conservative rule. With a new government coming in, what does that mean for motor insurers?
I mention motor insurers specifically, given that the new transport secretary Louise Haigh MP said during the election campaign that regulators such as the FCA and Competition and Markets Authority needed to investigate the sector’s premiums.
“Car insurance is a legal requirement and an essential – not a luxury. Labour won’t sit back and watch while drivers are punished by the out of control cost of cover,” she told The Mirror.
“We will urgently call in the regulators to crack down on any unfair practices and to come clean on the causes of soaring costs for consumers.”
What do the figures show?
Haigh’s comments come as figures from Confused.com and WTW , published on 18 April 2024, show that car insurance premiums saw an annual rise of 43% (£284) between Q1 2023 and Q1 2024.
This increase hits amid a rise in costs to insurers, with ABI figures from 8 April 2024 showing that motor insurers paid an average of £1.13m every hour for claims during 2023.
I recently wrote a feature exploring industry responses to Labour’s tough stance on premiums – among the respondents I spoke to was Matthew Maxwell Scott , executive director of the The Association of Consumer Support Organisations (ACSO)
He said that while there were valid reasons for the cost of insurance going up, he felt Labour’s view was also understandable because premiums had risen “well beyond average”.
However, while motor insurers may get questions over premiums, data also shows prices are starting to stabilise.
According to ABI statistics published on 29 April 2024, the average motor premium sat at £635 between January and March 2024, up just 1% from the previous quarter.
Mervyn Skeet , the ABI’s director of general insurance policy, said the figures demonstrated that the motor market was competitive as insurers look to keep prices stable despite incurring higher costs.
Reductions?
This is good news because it shows that premiums could be on track to decrease throughout the rest of this year.
To help with this, many insurers have signed up to the ABI’s 10-point motor road map – unveiled in February 2024 – which is aimed at tackling insurance costs for all drivers.
Association of British Insurers members are additionally following new steps to manage the amount of money drivers are charged for paying their motor insurance monthly instead of annually.
This will surely please the new Labour government, which has also pledged to play its part in reducing claims by decreasing the number of potholes on the road.
According to Haigh, drivers had to pay out £500m last year in repairs caused by potholes.
And insurer Zurich Municipal revealed in June 2023 that local authorities saw 81 pothole-related vehicle damage claims in 2022, up from 24 the previous year.
Labour has said that it aims to fix up to one million more potholes every year, which – if achieved – should relieve some claims-related stress for insurers.
Industry welcomes Labour
While Labour’s pledges are clear, it remains to be seen how exactly it plans to engage with the motor insurance sector given it has only just got into power.
But it seems that the insurance industry is happy to work with a new government, with plenty of firms emailing me following the news we woke up to last Friday morning.
For example, trade body Biba said it was looking forward to working with Labour on motor premiums as part of its plans to address wider cost of living impacts on insurance costs and the protection gap.
Others sought to give Labour advice, with Martyn Mathews, managing director of SSP Broker, telling me that the party needed to “drill down into the detail to be able to tackle high motor insurance premiums”.
He continued: “The costs faced by insurers are manifold – there is no magic wand to deal with the cost of repair, replacement vehicles, theft and fraud.
“It’s a multi-layered problem that needs a multi-layered solution.”
I am sure over the next few weeks we will find out more about Labour’s plans to tackle premiums, but what are your thoughts on its pledges? We’re keen to hear from our readers, so do feel free to get in touch with me at james.cowen@insurancetimes.co.uk
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