Car insurance claims reached an all-time high last year, with insurers paying out a record £11.7 billion, according to recent reports. The surge in payouts is attributed to escalating vehicle repair costs and a rise in theft incidents, placing a significant strain on household finances.
The Association of British Insurers (ABI) released data showing the substantial financial impact on the industry. The average cost of motor cover hit £621 in the final quarter of 2024, slightly down from the beginning of the year but still representing a 15% increase for the year. In comparison to 2023’s average of £622, this increase equals an added £78 per policy.
This increase coincides with a 17% rise in total claims payouts. Insurers processed 2.4 million motor insurance claims throughout 2024. The average private car insurance claim rose by 13% year-on-year, reaching £4,900. The last quarter of 2024 saw the highest claims, with an average payout of £5,300.
Vehicle repair costs were particularly challenging, totaling £1.9 billion in the fourth quarter alone. The ABI reported that yearly repair bills reached a record £7.7 billion, a £1.5 billion increase from 2023. Theft-related claims also saw significant increases, with the average claim for thefts reaching £11,200 in the final quarter of 2024.
These figures highlight the mounting financial pressures faced by both insurers and motorists alike. The rising costs continue to drive up premiums and payouts across the sector. The latest data comes one year after the ABI launched its 10-Point Roadmap, which aims to address insurance costs through collaboration between industry and government.
The initiative has made progress in tackling vehicle theft and insurance fraud, combating uninsured driving, and helping consumers make informed decisions. The roadmap also addresses the impact of the Personal Injury Discount Rate.
The ABI has identified areas where government action could help, including improvements to skills and capacity in the vehicle repair sector, better UK roads, and the implementation of the government’s road safety strategy.
Mark Shepherd, Head of General Insurance Policy at the ABI, commented on the current situation.
“Our latest data paints a difficult picture for drivers and the industry alike. Through our 10-Point Roadmap, we’ve been working hard to help tackle the cost of motor insurance and we’ve seen progress in some areas, with average premiums having fallen from their peak. However, we recognise that the price of cover remains a strain on household finances whilst the industry faces significant cost pressures. Industry is doing all that it can, but it is now for Government to take the necessary action to combat high claim costs.”
Shepherd also cautioned against potential increases in Insurance Premium Tax at the upcoming Spring Forecast, warning it would further burden “hard-working households and businesses.”
