After years of relentless increases, UK motorists are finally getting relief. Motor insurance premiums have now fallen for three consecutive quarters in 2025, according to the Association of British Insurers (ABI), marking the first sustained reduction since 2021.
Between July and September 2025, the average premium stood at £551 – £13 lower than the previous quarter and £56 below the same period last year. When adjusted for inflation, the real-terms decrease is even more pronounced at £79 year-on-year.
But with underlying cost pressures still present and insurers warning that this relief may be temporary, now is the time to understand what’s driving these changes and how to secure the best possible rates.
Why Premiums Are Falling
The decline follows a challenging period where premiums soared due to multiple factors. The ABI’s Q2 2025 data showed the average premium had already dropped to £562, down from £622 in the same quarter of 2024 – a welcome £60 reduction.
Key factors behind the falls:
Market Stabilisation: After pandemic-related disruptions and supply chain issues eased, insurers gained better visibility on claims costs, allowing more competitive pricing.
Competition Intensifies: With more stable market conditions, insurers are competing more aggressively for customers, particularly those with clean driving records.
Improved Claims Efficiency: While still elevated, the rate of claims cost increases has slowed. The ABI reported that average claims remained relatively stable in Q2 after an 8% spike in Q1.
The Catches: Why This May Not Last
Despite the positive news, significant challenges remain. Chris Bose, Director of General Insurance Policy at the ABI, cautioned: “These continue to be tough times for many families facing higher cost of living bills, and underlying pressures on claims haven’t gone away.”
Repair Costs Still Soaring: Modern vehicles are expensive to fix. ABI members paid out £3 billion in claims during Q3 2025, with repair costs accounting for 64% (£1.9 billion) of that total.
Today’s cars feature advanced electronics, integrated sensors, and sophisticated safety systems. A simple wing mirror now contains actuators, motors, lights, signals, and sensors – making even minor repairs specialised, time-intensive, and costly.
Theft Epidemic Continues: Vehicle theft remains a serious problem, with theft-related claims totaling £142 million in Q3 alone. The ABI emphasises that tackling this challenge requires collaboration between manufacturers, insurers, and the government.
Skills Shortage Impact: The vehicle repair sector faces a shortage of qualified technicians, contributing to longer repair times and higher labour costs. The industry is calling on the government to invest in training programs to address this gap.
Regional and Demographic Variations
Not everyone is seeing the same level of savings. Premium reductions vary significantly by region, age, and driving history:
Geographic Differences: While specific regional Q3 data isn’t yet published, earlier quarters showed substantial variations across the UK, with some regions experiencing steeper declines than others.
Age Matters: Younger drivers under 26 have historically seen the largest premium increases but are now experiencing some of the steepest declines. Conversely, drivers over 70 have seen more modest reductions but still benefit from lower overall costs.
Claims History Critical: Insurers are becoming increasingly selective. A clean claims history is more valuable than ever, while even a single recent claim can significantly impact your ability to find competitive quotes or switch providers.
What’s Coming Next?
The industry’s 10-Point Roadmap outlines ongoing initiatives to tackle insurance costs, including combating vehicle theft, reducing fraud, and improving road safety.
However, the ABI warns that government action is crucial to sustain progress. Key asks include:
- Investment in repair sector training
- Improved road safety infrastructure
- No increases to Insurance Premium Tax (which adds 12% to all motor policies)
The Motor Insurance Taskforce Final Report published in December 2025 highlights that while real-terms premiums are now lower than 2017 peaks, average claim costs have risen 21% over the same period, squeezing insurer margins.
The Long-Term Perspective
According to the ABI’s comprehensive tracker, which analyses nearly 28 million policies annually based on actual prices paid (not just quotes), the current market represents a significant shift.
In Q1 2025, the industry paid out a record £3.2 billion in claims – the highest quarterly payout since records began in 2013. The fact that premiums are falling despite these record claims demonstrates the competitive pressure in the market.
However, this squeeze on margins may not be sustainable long-term. Some analysts predict the market could swing back to premium increases if claims costs don’t moderate or if insurers determine current pricing is unprofitable.
Professional Advice Matters
While falling premiums are welcome news, insurance isn’t just about price – it’s about having the right protection when you need it most. Before making changes based solely on cost, consider:
- Are you adequately covered for your vehicle’s current value?
- Do you understand your policy exclusions and excess levels?
- Have you disclosed everything accurately to avoid claims being declined?
- Is your no-claims bonus protected, and do you understand the terms?
At The Bateman Group, we help clients navigate the motor insurance market to find the right balance between cost and coverage. Our independent status means we can access multiple insurers to find you the most competitive rates while ensuring your protection is comprehensive.
With premiums falling but market conditions potentially shifting, now is an opportune time to review your motor insurance. Whether you need a straightforward quote or advice on more complex situations – modified vehicles, multiple drivers, business use, or claims history concerns – we’re here to help.
The Bateman Group provides independent insurance advice across motor, home, business, and specialist insurance needs. Contact our team for a no-obligation motor insurance review and quote comparison.
This article is for information purposes only. Insurance needs vary by individual circumstances, and terms and conditions apply to all policies.
