Drivers can breathe a sigh of relief as annual premiums have seen the biggest annual plunge since records began, new data reveals.
The average yearly premium has dropped by £60 in a year, a 9.6 per cent fall, the largest tumble since records began in 2013.
Motorists typically paid £562 for their annual insurance between April and June this year compared to £622 in the same period of 2024, industry body the Association of British Insurers says.
Once adjusted for inflation, the year-on-year drop is £81.
Motorists have been forced to pay higher premiums for the past few years which grew beyond the rate of inflation due to soaring repair costs and supply chain issues.
Costs for annual premiums peaked at £635 in the first three months of 2024, the ABI says.
Reversing: The cost of car insurance has fallen back this year, the ABI says
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But now annual costs are back below £600 as inflation figures have fallen from their double-digit peaks and insurers are pricing competitively to avoid losing out on business to a handful of so-called mega-insurers that dominate the industry.
Despite the plunge in prices, premiums are still far higher than what they were five years ago in the pandemic, when less driving and fewer collisions meant premiums could be kept low.
And even though premiums are tumbling now, insurers are still facing a battle to keep claims down.
The value and number of claims is soaring due to repair costs and increasing numbers of thefts, the trade body says.
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From April to June, insurers settled 669,000 claims, up 5 per cent on the first three months of 2025 where it was just 639,000 claims.
High repair costs continue to contribute to climbing claims as this has soared by £100million since the first three months of this year to a cool £2.1billion.
Climbing repair costs could in turn increase premiums so insurers are battling to keep them low.
Modern cars now have a range of complex electronics such as advanced sensors which can make them more difficult or costly to repair.
Increased labour costs are also adding to soaring repair charges along with inflationary pressures and component shortages.
Plus, there is a nation-wide shortage of skilled technicians which slows repair times and further inflates costs.
While Mark Shepherd, head of general insurance policy at the ABI, is encouraged to see tumbling motor insurance premiums, he says: ‘With the cost of cover still weighing on household finances, we must not lose momentum in tackling the persistent pressures driving up claims.
‘That’s why we continue to urge the Government to support the industry by investing in training for the repair sector, improving road safety, and holding firm against any rise in insurance premium tax in the autumn Budget.’