The government has set up a new taskforce to tackle soaring car insurance premiums, which have jumped by over 20% in the last two years. This comes after a pre-election pledge to involve industry regulators in addressing rising insurance costs. Transport Secretary Louise Haigh has formed the taskforce, which includes the Association of British Insurers (ABI), Citizens Advice, and Compare the Market.
Working with the Department for Transport, the taskforce will investigate what’s driving up car insurance costs and whether drivers are getting a fair deal. Haigh emphasised that car insurance is "essential, not a luxury," adding that the taskforce marks significant progress in ensuring fair pricing for drivers. She said it will focus on identifying the factors behind these rising costs and finding solutions.
This comes as new data from the Financial Conduct Authority reveals that the average car insurance premium has risen by 21% since June 2022 – much higher than in France, Germany, and Spain. Earlier this year, Citizens Advice told the Transport Select Committee that some people are being forced to choose between paying for car insurance or essentials like food.
The government has already redirected HS2 funds to help fill a million potholes per year, addressing one factor contributing to rising insurance costs. However, it hasn’t yet addressed the UK’s growing car theft problem, which many feel is being neglected, as only 2% of cases result in charges.
Colm Holmes, chair of the ABI’s motor insurance committee, said the taskforce is a “clear step forward” in tackling this complex issue with a collaborative approach from the industry, regulators, and government.
In the meantime, the upcoming Vehicle Risk Ratings (VRR) scheme could help reduce insurance costs. Replacing the current insurance group system, VRR will evaluate cars based on performance, damageability, repairability, safety, and security to give insurers better insights for setting premiums. All new cars in the UK market after August 1 will use this system, with full implementation expected within 18 months.
