Motorists in the UK face a big rise in the cost of insurance due to Donald Trump’s trade war.
A new study from re-insurance giant Swiss Re warns that the US President’s tariffs will push up the cost of parts for repairs and damage supply chains. Those increases are likely to be passed on to customers in the form of higher premiums.
Drivers have already seen the cost of cover go up markedly after the pandemic. A new rise in motor premiums would come just as households face a wave of higher bills from water and council tax to energy and broadband, which all rose in April.
The higher cost of motor cover will be a particular blow for families and other households that need more than one car. And the Swiss Re report said it presented a fresh headache for UK insurers, who were only just recovering from a previous tough period of see-sawing costs.
Premiums fell during Covid, when people used their cars far less, before rising sharply again. Firms had been able to reduce prices during the pandemic with fewer drivers on the road meaning fewer accidents and less paid out in claims.
The total distance driven by motorists in the UK had reverted to pre-pandemic levels by 2023, when it reached 331 billion miles, the Swiss Re report said.
Trade war: A new study warns that Donald Trump’s tariffs will push up the cost of parts for repairs and damage supply chains
Some insurers were left in the red as shortages of car parts and soaring energy prices raised the cost of repairs, and have only just got back on an even keel.
Trump’s trade wars have thrown another spanner in the works. Tariffs imposed by the US – and by other countries in retaliation – could make complex networks of supply chains seize up, leaving it harder and more expensive to obtain parts.
Ed Hull, senior underwriter at Swiss Re, said insurers’ hopes of a return to healthy profits may have been dashed by Trump.
‘A combination of falling inflation, improved claims frequency and pricing corrections on 2023 premiums has many commentators expecting a return to profitability for UK motor insurance in 2024,’ he said. ‘But we can expect this to give way to more challenging conditions in 2025, with headwinds on the horizon.
‘Top of the list is the ongoing threat of geopolitical uncertainty and resulting supply chain disruption, which affects availability of vehicles and spare parts. This can lead to delayed repairs and increased costs, which then need to be reflected in insurance premiums.’
The prediction of higher prices for drivers reveals the far-reaching impact of Trump’s tariffs beyond the shores of the US.
It suggests that, even after the White House managed to quell a financial market meltdown by announcing a 90-day pause on most of the duties announced last month, the reverberations from his ‘liberation day’ shock will continue to affect firms and households across the world.
In Britain, motorists also have to contend with the stealth Insurance Premium Tax (IPT), which has been rising ever since it was introduced in 1994 at a 2.5 per cent rate. It has since been increased by Governments of both stripes and now stands at 12 per cent for motor insurance, with a rate of 20 per cent for breakdown, pets and travel.
Direct Line chief executive Adam Winslow has estimated that someone with a home and motor insurance policy is typically paying more than £100 a year in IPT.
The latest projections from the Office for Budget Responsibility suggest that the tax will bring in £9.9 billion annually by the 2029-30 financial year.
UK insurers paid out a record £11.7 billion in car insurance claims last year according to the Association of British Insurers.
And increases in theft and repair costs continued to push up the average cost of premiums, which rose 15 per cent to £622 a year.
That followed a 25 per cent increase in 2023.
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This article was originally published by a www.dailymail.co.uk . Read the Original article here. .