Inside the car repairs crisis driving up car insurance prices

Auto insurance premiums are up 16 percent in a year as insurers say they must pass on rising repair costs.

According to new data from the Association of British Insurers, the average premium paid for comprehensive motor insurance in the first three months of this year was £478.

That’s 16 per cent more than the same period in 2022, and the highest level since premiums reached £483 in the last three months of 2019.

The reason for the rising premiums is a storm of increased costs for insurers — especially repairs, according to insurance company Direct Line and the ABI.

Jonathan Fong, ABI senior auto insurance policy advisor, said: ‘With households grappling with the rising cost of living, the last thing anyone wants is a higher auto insurance bill.

‘Of course every motorist wants the best insurance and insurers do everything they can to keep car insurance as competitive as possible. Yet, like many other industries, insurers continue to face higher costs.

“The price of certain raw materials and energy costs are rising far above general inflation, and it is becoming increasingly difficult to absorb these costs.”

Rising car repair costs

Energy bill – up to 300%

An ABI spokesperson said gas and electricity bills for car repairers have risen by 300 per cent, bringing the average energy cost per repair to £70.

Auto repair shops, as businesses, have never had any government support for household utility bills, meaning they pay full price for rising gas and electricity costs.

This is compounded by the fact that auto repairers have to use large amounts of power, an ABI spokesperson said:

This is passed on to the consumer as an increased premium.

Paint and parts – up to 16%

Insurance premiums are also being driven up by rising paint prices and a shortage of car parts.

The lack of parts started with the global shortage of semiconductors during the worst of the pandemic, which manufacturers are still grappling with.

According to insurance company Saga, more than a third of the price of a new car consists of microchips and semiconductors.

Russia’s war against Ukraine has also exacerbated the shortage of parts.

For example, the average car has more than three miles of wiring inside, which is organized with wire harnesses.

Ukraine was a major manufacturer of wiring harnesses and the conflict has led to a shortage of parts for automakers such as BMW, Porsche and Volkswagen.

Overall, parts and labor shortages have increased the average time to repair a car with minor damage from the norm of 13 days to 17 now.

For cars that are so badly damaged that they can no longer drive, that time has increased further – from 26 to 39 days.

Meanwhile, paint costs are also rising – in part, insurers say, because the finish expected of modern cars is more professional than in the past, and because cars are larger – so more paint is needed.

But the rising cost of paint is also due to oil prices, which, while falling, are still historically high.

Replacement car cost – up to 30%

With cars being repaired longer, there is more demand for replacement cars, driving prices up by almost a third.

That price is paid by drivers, as higher premiums.

In response, instead of paying to fix a crashed car, some insurers are now asking to buy it from the owner and then sell it for scrap to avoid the cost of repair.

Labor costs – 7.5% higher

Wages for auto repairers are also rising, which is passed on to insurers – and then to drivers.

These salaries are rising due to a shortage of mechanics, which started after Brexit, and the growing demand from workers for higher wages to help with the cost of living crisis.

Used car costs – 30% higher

The value of used cars has risen as the shortage of parts has led to fewer new ones for sale.

The average price of a used vehicle increased by 30 percentor £4,119, in three years, according to Auto Trader.

This in turn means rising insurance costs, because the value of the insured vehicle is higher.