The Treasury has issued a statement over major changes to car insurance. The comment comes after MPs were recently told that the Government needs to do more to bring down the costs of motor insurance.
The costs of motor insurance rose faster than inflation in 2022 and 2023, with the average price for a comprehensive policy peaking in the first quarter of 2024 at £635 a year. Industry data suggests prices have been falling since then, with the average premium at £551 in the third quarter of 2025, down from £607 a year before.
Speaking recently to the Treasury Committee in Westminster, Sian Williams, chair of the Financial Inclusion Commission, urged the Treasury Committee for more action to bring down prices. She said: “What we’d like to see is the Government requiring the industry to model the costs and impact of a subsidy scheme to reduce the costs and the exclusion of people, particularly on low incomes.”
The Treasury was asked what plans are underway to bring down the costs of car insurance. A Government spokesperson said: “This Government is committed to tackling the high cost of motor insurance.
“That’s why we have set up a task force, and are taking action on its recommendations to deal with vehicle theft and repair costs, which it identified as key to lowering claim costs and reducing driver premiums.” On the question of a subsidy scheme, the task force has looked at this idea.
But the group concluded that the impact of direct market intervention would be “hard to predict” and could result in “increased costs for others”. The Government said it has “no plans” to take forward this proposal.
The final report from the taskforce, published in December 2025, explains: “Any intervention to reduce premiums for one group, for example through prohibiting the use of certain risk factors or cross-subsidisation models, would inevitably result in increased costs and potential access issues for others, potentially distorting market dynamics.
“Paying for the risk an individual brings to an insurance pool is also fundamental to removing moral hazard – where consumers are incentivised to take greater risks, in this case by artificially low premiums – from the market.” The taskforce also looked at the state of the UK motor insurance market more broadly, and found it was “strongly competitive and innovative”.
But the group also determined that providers have faced “real and increased costs” to serve customers over recent years. For example, FCA research found that the cost of providing replacement vehicles has risen considerably, increasing by almost 50 percent between 2019 and 2023, rising from £473million to £699million.
This rising cost also made up around 10 percent of the overall increase in the costs of claims over this period.