Drivers can finally breathe easy as car insurance premiums have seen the largest annual drop on record, according to new data. The average annual premium has fallen by £60, marking a 9.6% decrease—the biggest decline since records began in 2013.
Motorists paid an average of £562 for their annual insurance between April and June this year, compared to £622 during the same period in 2024, as reported by the Association of British Insurers (ABI). Adjusted for inflation, this represents an £81 reduction.
For the past few years, drivers have faced rising premiums, largely driven by soaring repair costs and supply chain issues. Premiums peaked at £635 in the first quarter of 2024. However, costs have now dropped below £600 as inflation figures ease, and insurers are pricing competitively to stay ahead of larger companies, known as mega-insurers, that dominate the market.
Despite this significant drop in premiums, insurance costs are still considerably higher than they were five years ago during the pandemic when fewer cars were on the road and collision rates were lower.
Even with premiums falling, insurers are still battling to keep claims under control. The value and number of claims have risen sharply due to ongoing repair costs and an increase in vehicle thefts. From April to June, insurers settled 669,000 claims, a 5% increase compared to the 639,000 claims in the first quarter of 2025.
The surge in repair costs continues to contribute to higher claims, which have risen by £100 million since the beginning of the year, totaling £2.1 billion. With modern vehicles featuring advanced electronics and sensors, repair work is more complex and costly. These rising repair costs may eventually lead to increased premiums, posing a challenge for insurers to maintain low rates.
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