UK motor and home insurance premiums extended their downward trend in late 2025, though data from multiple indices suggest the market may be approaching a pricing floor.
Comprehensive car insurance premiums have fallen 13% (£111) over the past 12 months, bringing the average to £726, according to the Confused.com Car Insurance Price Index in association with WTW. Premiums have now dropped £269 (27%) since peaking at £995 in December 2023, marking eight consecutive quarters of decline.
Younger drivers saw the largest reductions. Premiums for under-25s fell 16% on average, with 17-year-old drivers experiencing a 25% annual decrease from £2,568 to £1,932. Drivers aged 18 saw an 18% reduction to £2,262, while those aged 48 experienced the smallest drop at 10% (£73) to £653.
The latest quarterly decline of 1% (£9) from September to November 2025 was the smallest since the downward trend began in early 2024. Pearson Ham Group's General Insurance Price Index recorded a similar pattern, with motor premiums falling just 1.4% in Q4 compared to 4% in Q2 and 3% in Q3.
Tim Rourke (pictured above, left), UK head of P&C pricing, product, claims and underwriting at WTW, said: "Motorists have benefitted from lower insurance premiums driven by a continued decline in personal injury claims through 2025." He noted bodily injury claims have fallen from 16% of insurers' spend in 2021 to 9% in 2025, likely due to whiplash reforms.
Rourke added that rising claims inflation and higher repair costs linked to complex vehicle technology may lead to losses in 2026, potentially reversing the downward price trend.
EY forecasts align with this outlook, projecting that the sector will broadly break even in 2025 before recording losses in 2026. Net combined ratios of 101% in 2025 and 111% in 2026 are anticipated, meaning for every £1 of premium written in 2025, insurers will pay out £1.01 in claims and expenses, rising to £1.11 in 2026.
Premium rates are then forecast to increase 3% in 2026, adding an average £15 per policy. EY noted that carriers reduced prices through 2024 to remain competitive, just as higher repair costs and broader inflationary pressures began driving up claims again.
Regionally, Northern Ireland was the only area to see an annual price increase, rising 1% to £907, making it the third most expensive region. Manchester and Merseyside recorded the largest drop at 18% (£178) to £836. South West England remains the cheapest region at £500.
Home insurance premiums also continued to decline, falling 0.8% in Q4 2025 compared to 3.8% in Q2 and 4.9% in Q3, according to Pearson Ham Group. Combined buildings and contents premiums are now 12.3% lower than a year ago.
Stephen Kennedy (pictured above, right), director at Pearson Ham Group, said: "We're now in a phase where broad price cuts are giving way to finer adjustments - insurers appear to be near a sustainable floor in pricing."
He added that targeted adjustments are likely to become more pronounced as insurers shift focus to profitable growth and market segmentation entering 2026.
