Britain’s financial services watchdog has revealed that the rise in motor insurance costs has triggered a wave of complaints as the country grapples with a cost-of-living crisis, reported Reuters.
This increase has been attributed to various factors including supply chain issues and the complexity of modern vehicles.
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The Financial Conduct Authority (FCA) director of insurance Matt Brewis conveyed to the Treasury Committee hearing on the insurance market that the agency has been inundated with “heart-rending stories” from individuals struggling with the escalating costs of living, including insurance premiums.
Brewis noted that there has been a “significant increase in pricing of motor and home insurance over the last two to three years”, with motor insurance seeing the highest level of complaints.
Brewis attributed the price hikes to supply chain disruptions, the increasing complexity of vehicles, and the volume of claims.
He also mentioned that the industry had underestimated the impact of inflation, leading to substantial underwriting losses and the need to adjust prices to account for future inflation.
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By GlobalDataDespite these challenges, Brewis emphasised the competitive nature of the sector, which comprises over 48 active insurers.
According to the committee, car insurance inflation reached a peak of 50% in the past year, as per data from Britain’s Office for National Statistics.
Citizens Advice principal policy manager David Mendes da Costa highlighted the difficulty consumers face in understanding the factors driving up premiums.
He also pointed out that people of colour tend to pay more for car insurance than white individuals, a discrepancy largely based on geographical location.
Association of British Insurers director of regulation Charlotte Clark told the committee that the rise in premiums is a reflection of increasing costs for repairs and general inflation, noting that the industry’s profits are not substantial.
She added that the actual cost of insurance has returned to its 2018 levels when accounting for the 20% drop in prices during the Covid-19 pandemic due to reduced driving.
Allianz UK CEO Colm Holmes described the market as “incredibly competitive”.
He clarified that Allianz does not collect data on customer ethnicity and that the key determinants for risk and pricing are a customer’s postcode and associated data on accident rates and crime probability.
Earlier this week, an investigation by Which? revealed that some insurers are charging annual percentage rates of up to 40% for monthly payments.
