5 motor insurance trends for 2024 and beyond

As technology and consumer habits evolve, so will the way we insure our vehicles. This article tracks key transformations in the insurance industry.

Below, I discuss five crucial motor insurance trends for 2024 and beyond. I share insights on electric and connected vehicles. I cover customer sentiment, new insurance products, and car ownership.

1. Consumer trust in car insurers is likely to stay low, even as premiums decrease

In December 2023, a study by Which? found that consumer trust in car insurers was at an all-time low. Another study in April 2024, this time by Fairer Finance, agreed. 

Car insurance has always been a grudge purchase. Consumers feel obligated to buy it without getting anything tangible in return. Many policyholders have never claimed, despite having insurance for decades.

These studies show that consumer resentment has reached new highs. I identified two main reasons for this in my recent article on consumer trust in car insurance:

• Premiums are still high. Despite insurance dropping since it peaked in Q4 2023 (at £995), the current average cost of £882 (according to our car insurance price index) is still considered too high by many consumers. Plus, UK motor insurance customers have already faced other price hikes in recent years due in part to the energy crisis. Overall, these high premiums are due to the higher prices that insurers have to pay for repairs and parts, which they have to pass on to consumers. But as this story in The Guardian shows, customers are concerned that price hikes are simple profiteering. In reality, current profitability for most insurers is low, with many making a loss.
• Complaints about insurance claims have increased. The Financial Ombudsman Service (FOS) reports that motor insurance is the most frequently complained-about insurance product. Complaints about claims rose by 90% year on year, with delays and slow payouts being the main issues.

So, we started 2024 at a very low position when it comes to trust in insurance providers, but is the industry likely to see any improvement?

There is some good news. As mentioned, premiums seem to be dropping as inflation falls. Confused.com’s car insurance price index shows average premiums have dropped by 6% in the last 3 months (from April 2024).

These prices are still high compared to two years ago. But, the drop suggests some relief. As prices drop, customer dissatisfaction should decrease.

However, cars are likely to remain more expensive in the long term. Moneybarn reports that many car manufacturers almost doubled their prices over the past decade. More expensive vehicles are also costlier to insure, which might not improve customer sentiment.

So what can insurers do to win over customers?

Delivering more value through frequent customer engagements or regular incentives can help. For example, Vitality health insurance offers small, positive interactions. These include free regular coffees and Apple Watches.

Insurers could also offer greater transparency about cost increases. Customers are often surprised by their renewal premiums. Explaining the additional costs can mitigate this shock.

2. Connected cars may make telematics policies more common, but only if they offer lower premiums

Connected cars come standard with integrated computers connected to the internet. They can communicate with other devices and vehicles while collecting data on driving behaviour. Statista predicts all new registered vehicles will be connected by 2026.

The biggest impact of connected cars might be in telematics integration. Telematics policies collect data on driving behaviour to assess risk during underwriting. These policies have required black boxes to be installed by the insurance company. But, they are only in about 6% of the market.

Connected cars can track driver information without needing a black box. The native computer uses this data for diagnostics and advanced functionality. However, this data isn’t automatically shared with insurers.

Would consumers be happy to share this data? They might be reluctant due to concerns about being penalised for their driving habits.

Two things need to happen for this to be adopted by consumers. Firstly, consumers would need to receive significant cost benefits. Nimblefins reports that telematics policies are usually cheaper than conventional ones - typically by about 13% or £100.

Second, the perception of telematics needs to change. Currently, it’s seen as a policy for younger motorists, with some sacrifices. But in other behaviours, such as buying health insurance, customers are happy to share their data.

One way to make telematics policies more appealing could be to allow customers to share data after it’s been collected. This way, their historic driving data could inform next year’s premiums.

Overall, the biggest obstacle to connected car telematics is the size of the discount. Insurers need to offer much larger discounts to overcome privacy concerns.

3. Manufacturers may lean into embedded policies, but there are obstacles

As connected vehicles become more common, manufacturers may begin to offer cover themselves. Admiral offers embedded car insurance policies with Ford, while Tesla has its own insurance product. These are gaining traction, with 17% of Tesla customers opting for embedded cover in the US.

Is it likely to become mainstream? More connected cars need to be on the road for manufacturers to assess the opportunity for bundled insurance. By 2026, connected cars are expected to represent 100% of vehicles sold. But it will take well beyond 2026 for most cars on the road to be connected.

The data from connected cars could make embedded policies more compelling. Currently, the prices of embedded cover are higher than those on price comparison sites like Confused.com. But if you could share telematics data with your manufacturer, you might be enticed by discounts.

Even if it was more compelling for consumers, manufacturers need to assess whether they want to enter this market. Insurance comes with a lot of risk, and manufacturers may see reasons not to offer embedded products.

Consumers are used to shopping around for the best deal. Over 90% of car insurance purchases are made through PCWs. If they can find a cheaper policy elsewhere, they’ll likely continue to do that.

Embedded cover usually has restrictions, such as exclusions for younger drivers or mileage limits. For many consumers, it isn’t even an option.

4. Electric vehicles are the future, but adoption will likely remain slow

Electric vehicles (EVs) are much talked about. The Climate Change Committee describes them as “one of the most important actions to achieve the UK’s Net Zero target.”

But how is the UK’s transition to electric going, and what are its implications for motor insurance?

From my perspective it seems ambitious that the UK will reach its target for 80% of cars sold to be electric by 2030 and 100% by 2035. Even though the UK is ahead of the government’s targets for 22% of car sales to be EVs in 2024, there’s a long way to go.

Here’s why:

• High Costs: New EVs are pricey. In 2022, they cost over 27% more than ICE (Internal Combustion Engine) vehicles, according to JATO. The secondhand market is still immature, with few affordable options. While secondhand cars make up 82% of passenger car sales, only 1.6% of EVs are bought used, says We Buy Any Car. There’s also concern about EV batteries. We don’t have enough data on their lifespan, but replacements can cost as much as £9,000, according to the RAC. This is a worry for drivers who can't afford these vehicles.
• Poor Charging Infrastructure: EY reports that we’ll need 20 million chargers by 2040 to support the number of EVs on the road—88% of these will need to be in private homes. The government promised 300,000 charge points by 2030, but this won’t be nearly enough. Convenient charging is a major concern for consumers. The infrastructure for private charging is lacking, especially for people who live in flats.
• High Insurance Costs: EVs are more expensive to insure because their repair costs are higher. In the year to Q3 2023, premiums for EV cover increased by 72% or £402, compared to a 29% increase for standard vehicles, according to Confused.com data reported in The Guardian. The shortage of EV-qualified mechanics—forecasted to be 16,000 by 2032—keeps repair prices high, which means insurance premiums for EVs will stay high too.

Overall, these factors will keep EVs expensive for drivers, preventing many from making the switch.

5. Car subscriptions will only increase if costs of ownership become truly prohibitive

Another much-discussed trend in the automotive industry in recent years is the possibility for changes in how we use and own vehicles. Back in August 2023, I wrote an article on the future of car ownership. In that article, I talked about how car sharing, mobility as a service, and flexible insurance could become more popular.

While these services are growing, car ownership is still strong. According to the National Travel Survey in 2021, “in 1985 to 1987, there were 8 cars for every 10 households in Great Britain. In 2021, there were 12 cars for every 10 households in England.

Interestingly, though, there may be some indication that younger generations are less interested in driving. In 1992 to 1994, 48% of 17-20 year olds and 75% of 21-29 year olds had a driving licence.

In 2014, that number fell to 29% of 17-20 year olds and 63% of 21-29 year olds, according to researchers at the University of Oxford and the University of the West of England.

Even more recently, generations such as Gen Alpha are emerging into adulthood, with technologies such as ridesharing at their disposal. Plus, as their working habits appear to be different. With more people working from home, they may have less need to drive to work every day.

So, what will we see in the future?

I suspect that we’ll see further growth in car-as-a-service offerings such as Uber and Lyft. Only 10 years ago, in 2015, Uber was active in only 5 UK cities, but you can now call a ride with an app pretty much everywhere in the country.

We could also see an increase in car subscription services that come with embedded insurance. However, I see little evidence so far that younger drivers don’t want to own cars at all.

Instead, something we could see grow is more flexible insurance policies, such as pay-per-mile policies. These could allow people who own a vehicle but don’t use it very often—such as those who only use it for leisure—to save on their insurance. Rather than having to pay a premium for an entire year, these customers could instead just pay for what they drive.

Car ownership patterns will likely only change significantly if owning a car becomes too expensive. As we’re seeing some of the highest insurance prices on record and a costly second-hand market, it’s not impossible that this will happen. However, there’s little evidence that we’ll move away from car ownership anytime soon. 

The motor industry is changing, but the cost of car insurance is still the most important factor 

The motor vehicle insurance sector is constantly evolving, and some key trends will likely become the norm. But car insurance is currently the most expensive it’s ever been.

Even if it falls, price will remain the most important factor in customer purchase decisions. For motor insurance trends to truly take off, the technology must offer customers a lower price and a better experience.

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