Why are motorhome/campervan premiums rising?

With general inflation as measured by the Consumer Prices Index (CPI) peaking at over 11% in October 2022 and pressure on household incomes coming from various directions the last thing you want to face is a significant increase on your motor insurance premium.

However a number of factors have come together over recent years to lead to the current market in which the Association of British Insurers (ABI) recently reported average annual increases of over 25% for private motor insurance premiums.

Following a prolonged period of relative price stability, driven by low inflation and a competitive market, price increases started to accelerate in 2022, particularly following Russia’s invasion of Ukraine. This added to existing inflationary pressures as a result of the bounce back from the Covid pandemic when ‘accidental’ savings built up during lockdown flowed back into the economy at a time when there were still supply chain bottlenecks as businesses struggled to get back up to speed and meet the extra demand. That meant prices went up.

The combined effect of these two abnormal ‘shocks’ has led to some highly unusual spikes in raw materials prices and labour costs. For example the ABI reports:

Examples of increasing cost pressures cited by some ABI members include: 

• Energy inflation adding to each repair.  
• Average paint and material costs have increased by nearly 16%. 
• Courtesy car costs to repairers are increasing at around 30%. 
• In addition, the average price of second-hand cars has jumped by 30% in three years according to Auto Trader. 

All of the above factors apply equally and in some cases more so to the leisure vehicle sector in which, for example, manufacturers of motorhomes had to compete with suppliers of delivery vehicles for the base chassis, driving up costs.

From an insurance point of view when underwriters were determining their pricing strategies for 2022/23 it was difficult (and in the case of Ukraine arguably impossible) to foresee these sudden changes and therefore expectations of inflation may have been much lower for some. A sudden and unexpected spike in inflation is especially challenging for insurers since they will pay future claims out of premium pots that they have built up during the previous period. It is no coincidence that a number of them reported very poor results in motor insurance for 2022 as a result, because the associated bill for claims was much higher than they anticipated. That in turn means that this year, in some cases, we will see a 'double whammy' effect whereby rate increases are introduced in order to both make up for any shortfall from previous periods, whilst also allowing for future expected inflation that will be impacting claims made on policies taken out / renewing in 2023 and 2024.

Looking ahead, possibly as early as mid 2024, rate increases may reduce to more ‘normal’ levels of say around 5% on average. However, it’s worth remembering that increases for certain groups of people may be much more or less than the average - things like the vehicle value, age of customer, location/storage of vehicle can all have a significant impact on the rating.

So here’s to hopefully seeing those more normal levels.

Do contact the Club on: 01342 649 919 to see how much our Defaqto 5 star Expert rated Motorhome and Campervan Insurance would cost. Click here to compare your motorhome/campervan insurance product.

For further reading or additional source material, visit the Association of British Insurers website here and here or the Insurance Business website.

Information reviewed and provided by our partner broker Devitt Insurance Services.

First published March 2024