Shares in insurance heavyweights Admiral and Direct Line slumped on Wednesday after the government unveiled a new taskforce to tackle the “spiralling” cost of motor insurance.
The Department for Transport said the taskforce – comprising regulators, motoring groups, insurers and consumer groups – aimed to stabilise or reduce motor insurance premiums while maintaining appropriate levels of cover.
Admiral was the worst-performing stock in Britain’s blue-chip FTSE 100 index on Wednesday morning, falling as much as 4.2 per cent. The firm is one of the UK’s biggest motor insurers, providing cover for 5.5m vehicles.
Direct Line was among the biggest fallers in the mid-cap FTSE 250, dropping as much as 3.6 per cent.
“Car insurance is an essential, not a luxury. It is vital to accessing economic opportunities and this government is committed to getting costs under control,” said transport secretary Louise Haigh.
“That’s why we’re taking direct action to bring insurance companies and regulators round the table to discuss how we can crack down on spiralling costs. The rising cost of cover affects all drivers, but some groups have been hit harder than others.”
Haigh added that the move was aimed at “rooting out the factors driving up costs for industry and ensuring drivers are able to hit the road”.
Analysis by the Financial Conduct Authority (FCA) found UK motor insurance premiums have grown by an average of 21 per cent since June 2022, well above comparable economies like Germany, France, Spain and Italy.
Britain’s insurance industry has blamed external factors like inflation, energy prices and the rising cost of repairs for the hikes.
Within the taskforce, the FCA is set to analyse the impact of rising insurance prices on different customer groups, like younger and older drivers, as well as those from ethnic minority backgrounds or on lower incomes.
The government also named participants including trade body the Association of British Insurers, consumer groups Citizens Advice and Which?, and price comparison website Compare the Market.