UK Motor Insurance Prices Rise for the First Time in Three Years as Insurers Pay Out a Record £3.2 Billion in a Quarter

After two years of falling prices, UK car insurance is getting more expensive again. The latest Defaqto data, reported by Insurance Edge on October 15, 2026, show that competitive quoted premiums at the end of September were 2.7% higher than in September 2025. That is the first annual increase since 2023, following price cuts in 2024 and 2025. Defaqto's Market Pricing Motor Insurance Price Index is based on quoted prices rather than prices actually paid, and the article does not give an average premium in pounds, so the data are best read as a measure of direction.

The increase has been gradual. Quarterly growth slowed to 0.5% in the third quarter, down from 2.1% in the second quarter. The average of the top five quoted premiums rose 0.4% in July and 0.2% in August, then fell 0.1% in September. The third quarter was the third consecutive quarter of growth, and prices rose 2.6% over the six months to the end of September. Perspective matters: premiums remain 12.8% below their level two years earlier, although they are 11.9% above where they stood at the start of 2020. Drivers have not yet seen a return to the peak, but the direction has changed.

The average hides large differences. Among providers, third-quarter price movements ranged from a fall of 3.5% to a rise of 9.6%, so some insurers are still cutting while others are pushing up. By age, older drivers saw the largest annual increases, while drivers under 26 and those aged 26 to 30 were still paying less than a year earlier. Movements by annual mileage band were more even, though drivers with lower mileage saw bigger increases. The regional spread was wide, from a fall of 1% in London to a rise of 16.3% in Northern Ireland. A driver's experience at renewal will therefore depend heavily on where they live, how old they are and which insurer they use.

Claims data from the Association of British Insurers (ABI) help explain why the price decline has ended. On July 30, 2026, the ABI reported, as covered by Insurance Times, that motor insurers paid out a record £3.2 billion in claims in the second quarter of 2026. That was 5% higher than in the first quarter and 7% above the second quarter of 2025. The average payout rose 4% to £4,900 compared with the first quarter. The ABI partly attributes higher costs to pricier repairs, as modern vehicles depend more on cameras, sensors and driver assistance systems. Even windscreens are affected: windscreen repair bills rose 7% to an average of £283.

The ABI also reported that the average premium climbed £6 to £566 in the second quarter, a 1% quarterly rise. After adjusting for inflation, it was £14 lower than in the second quarter of 2025, so in real terms premiums were still cheaper than a year earlier at that point. This helps to reconcile the two data sets. The ABI figure measures the average premium customers actually paid, and it is a lagging measure, while Defaqto measures quoted prices at a point in time. Quoted prices have begun to rise, and the ABI average may follow.

Chris Bose, the ABI's director of general insurance and international policy, said motor insurers are working hard to keep premiums competitive and affordable. He called on the government to help address claims inflation by building skills in the repair sector and improving the availability of parts, and he pointed to the Motor Insurance Taskforce as an opportunity to work with the government.

The dynamics here are straightforward. When premiums fall for a prolonged period while claims costs rise, insurers' margins narrow. Eventually, insurers raise prices to restore profit. The record quarterly payouts and the end of the price decline fit that pattern. The sources used here do not report insurers' profit margins or combined ratios, so the extent of the pressure cannot be measured from them.

There are also reasons the rise may stay modest. Competition is still strong, and the quarterly increase of 0.5% was much smaller than the 2.1% of the previous quarter. Several providers are still cutting, which shows that competition for customers remains alive.

What can drivers do? Because the range of price movements between providers is so wide, comparing quotes at every renewal is likely to produce more savings than usual. Using price comparison sites, checking cover as well as price, and being accurate about mileage and usage can all help. Drivers with lower annual mileage, who the data show have been facing bigger increases, may want to check whether a lower-mileage policy or a telematics product suits them. Older drivers, who have seen the largest rises, should ask about discounts and compare across insurers rather than automatically renewing. Residents of Northern Ireland, where quotes were up 16.3% on the year, are especially likely to benefit from shopping around.

The long-term fix, the ABI argues, lies in the cost of claims: repair skills, parts supply and vehicle technology. Until these costs ease, premiums are more likely to rise than fall, and the question for 2027 is whether competition between insurers can keep increases small.