Motor and home insurance premiums declined further in the second quarter of 2025, although the latest figures from Pearson Ham Group’s General Insurance Price Index indicate a shift in momentum and a possible easing of the market correction.
Average top-five motor insurance premiums dropped by 4% in Q2, compared to a 3.6% decline in Q1. However, monthly data suggests the pace of decrease is beginning to slow. Premiums fell by 0.8% in April, 1.7% in May and 1.6% in June, signalling that the sharp downward trend observed in late 2024 may be levelling out.
Compared to June 2024, average prices are now 16.4% lower, but remain 12.3% above pre-pandemic levels recorded at the start of 2020. The difference reflects the residual impact of claims inflation and the post-pandemic recalibration of pricing.
Stephen Kennedy (pictured above), director at Pearson Ham Group, said the current environment remains competitive, but there are indications that rates are nearing a point of equilibrium.
“What happens next will depend heavily on claims trends, consumer behaviour, and how aggressively insurers want to compete for new business in the second half of the year,” Kennedy explained.
Previously, Pearson Ham reported that the rate of premium decline has varied across regions. Northern England saw the most pronounced year-on-year decreases in motor premiums, with the North West and North East posting drops of 18.7% and 18.5%, respectively.
Additionally, vehicle value has become a more prominent factor in pricing movement. During April, cars valued between £10,000 and £20,000 recorded a 1% drop in average premiums, while those in lower-value bands saw more modest reductions, around 0.2%.
Analysts suggest that the higher cost of repairs and replacement parts for mid-range vehicles continues to influence insurer pricing models.
Premiums for combined buildings and contents cover also fell in Q2. Average top-five prices decreased by 3.8% for the quarter, marginally deeper than the 3.3% decline in Q1.
Monthly movements show a reduction of 0.4% in April, followed by larger drops of 1.9% in May and 1.5% in June. Home insurance premiums are now 8% lower year-on-year, suggesting sustained competition in the sector.
Despite the quarterly declines, prices remain 23.6% higher than in mid-2023, reflecting the lagging effects of elevated inflation.
Related research has also shown that the average cost of financing insurance through monthly payments remains significant. As of September 2024, consumers were paying an average premium financing cost of 10.7% – down from 11.9% in October 2023 – but still representing a notable additional expense.
Pearson Ham expects pricing trends in both motor and home to become more differentiated over the coming months. As broader declines taper off, pricing outcomes are likely to vary based on customer profile, location, and individual risk factors, suggesting a more segmented market environment in the second half of the year.
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