Lowering Insurance Costs for Cars and Homes
The latest data from Pearson Ham Group reveals that motor and home insurance premiums have continued their downward trend in Q4 2024 and Q1 2025, with the decline persisting into Q2 2025. However, the pace of these declines is moderating, pointing to a market nearing equilibrium but still impacted by prior inflation and claims costs.
In the motor insurance sector, the average top-5 premiums fell by about 4% in Q2 2025, a sharper quarterly drop than the 3.6% decline in Q1 2025. Monthly reductions in premiums have become more moderate compared to the sharper decreases seen in late 2024. Prices are now approximately 16.4% lower than June 2024 levels but still remain 12.3% above pre-pandemic levels, reflecting ongoing claims inflation and market adjustments post-pandemic.
Regional variations exist, with Northern England experiencing more significant year-on-year premium drops compared to other areas. Moving forward, motor insurance pricing is expected to become more differentiated by customer profile, location, and risk factors, indicating a more segmented market environment in the latter half of 2025.
In the home insurance market, combined buildings and contents insurance premiums also decreased in Q2 2025, by about 3.8%, closely matching the 3.3% drop seen in Q1. Despite recent falls, home insurance premiums remain 23.6% higher than two years ago, a legacy effect of the high inflation seen in 2023 and early 2024. The market for home insurance is stabilizing but still recovering from extended cost inflation.
The pricing environment for home insurance is also expected to become more nuanced and segmented in the near term. Stephen Kennedy, Director at Pearson Ham, notes the market is still competitive, but the slowing pace of premium reductions signals pricing stabilization. Future premium trends will depend heavily on claims trends, evolving consumer behavior, and the extent of insurer competition for new business during the second half of 2025.
Frances Luery, Product Manager at Pearson Ham, underscores the challenge in balancing premium reductions against the residual effects of inflation and the competitive landscape. The latter half of 2025 is expected to bring more differentiated pricing based on risk profiles and geographical factors.
[1] Pearson Ham Group. (2025). General Insurance Price Index: Q2 2025. [online] Available at: https://www.pearsonham.com/reports/general-insurance-price-index-q2-2025 [Accessed 15 May 2025].
[2] Pearson Ham Group. (2025). Motor Insurance Price Index: Q2 2025. [online] Available at: https://www.pearsonham.com/reports/motor-insurance-price-index-q2-2025 [Accessed 15 May 2025].
[3] Pearson Ham Group. (2025). Home Insurance Price Index: Q2 2025. [online] Available at: https://www.pearsonham.com/reports/home-insurance-price-index-q2-2025 [Accessed 15 May 2025].
- In the business sector, finance analysts are closely monitoring the motor insurance industry, as the Pearson Ham Group's Q2 2025 Motor Insurance Price Index reports a 4% drop in average top-5 premiums, suggesting ongoing fluctuations in the market.
- As for the home insurance market, finance professionals are anticipating a more segmented environment in the latter half of 2025, as sticking claims inflation and customer risk profiles could significantly impact premium prices, according to the Pearson Ham Group's Q2 2025 Home Insurance Price Index.
