Higher Tariffs on Imports Could Increase Your Car Insurance Premiums Under Trump's Plan
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UK motorists brace for a significant surge in insurance costs due to Donald Trump's trade war.
A recent report by reinsurance giant Swiss Re suggests that Trump's tariffs will escalate the cost of auto parts and disrupt supply chains. These increases are likely to be passed on to consumers through increased premiums.
Drivers have already encountered a substantial rise in motor insurance coverage following the pandemic. A new spike in motor premiums would come just as households face an onslaught of higher bills from water and council tax to energy and broadband, which all rose in April.
The higher insurance costs will hit families and multiple-car households hardest. The Swiss Re report predicts it will also present fresh challenges for UK insurers, who are still recovering from a previous period of fluctuating costs.
Premiums plummeted during Covid when people used their cars less, then surged again. Insurers could lower prices during the pandemic due to fewer drivers on the road, resulting in fewer accidents and reduced claims payouts.
However, by 2023, total driving miles in the UK had returned to pre-pandemic levels—reach ing 331 billion miles, as per the Swiss Re report. Some insurers have struggled in the red due to shortages of car parts and soaring energy costs exacerbating repair expenses, adding to their woes.
Trump's trade wars pose another obstacle. Tariffs imposed by the US, and by other nations in retaliation, could jeopardize complex supply chains by making it harder and pricier to obtain parts.
Ed Hull, senior underwriter at Swiss Re, warned, "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. But we can expect this to give way to more challenging conditions in 2025, with headwinds on the horizon."
In addition to the trade war-induced costs, British motorists must contend with the annual Insurance Premium Tax (IPT), which has risen since its introduction in 1994. The current rate stands at 12% for motor insurance, with a 20% rate for breakdown, pets, and travel.
According to the Association of British Insurers, insurers paid out a record £11.7 billion in car insurance claims last year, with the average cost of premiums soaring 15% to £622 annually.
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The prediction of higher costs for drivers hints at the wide-ranging impact of Trump's tariffs, reaching beyond U.S. borders. Even after the White House temporarily halted most tariffs last month, the repercussions from this "liberation day" shock may persist in affecting firms and households worldwide.
- In light of Donald Trump's trade war, UK motorists anticipate a markedly increased surge in insurance costs for their vehicles.
- The recent report by Swiss Re predicts that these increased costs result from the tariffs raising the costs of auto parts and supply chain disruptions.
- Already grappling with rising household expenses, multiple-car households and families will feel the brunt of these higher motor insurance premiums.
- The ongoing challenges for UK insurers, who are still recovering from fluctuating costs, will be further aggravated by the increased insurance premiums.
- As per the Swiss Re report, by 2025, the already strained conditions in the insurance industry will face headwinds, making for more challenging conditions.
- Besides the Insurance Premium Tax and record-setting payouts for car insurance claims last year, the influx of Trump's trade war-induced costs threatens to impact businesses, finance, personal-finance, and general-news regarding the UK motor insurance market.
