Treasury statement over major price changes and 'subsidies' for these households

The Treasury has released a statement regarding major changes to car insurance. This follows a recent MP meeting where the Government was urged to take further action in reducing motor insurance costs.

Motor insurance bills have seen an increase beyond the rate of inflation in 2022 and 2023. The average bill for a comprehensive policy reached its peak in the first quarter of 2024 at £635 annually. Industry figures indicate a decline in prices since then, with the average premium dropping to £551 in the third quarter of 2025, down from £607 the previous year.

Sian Williams, chair of the Financial Inclusion Commission, recently spoke to the Treasury Committee in Parliament, urging for more measures to lower 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."

• Tesco, Sainsbury's, Asda, Aldi considering new £2 rule for shoppers
• Aldi's sleek £3.99 magnetic organiser can 'level up' your kitchen storage

The Treasury was asked what plans there are to reduce car insurance costs. 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." Regarding the proposal of a subsidy scheme, the Treasury said the task force has considered this concept.

However, the group concluded that the impact of direct market intervention would be "hard to predict" and could lead to "increased costs for others". The Government has stated it has "no plans" to implement this proposal.

The taskforce's final report, published in December 2025, states: "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 more widely at the UK motor insurance market, finding it to be "strongly competitive and innovative".

However, the group also found that providers have faced "real and increased costs" to serve customers in recent years. For instance, FCA research found that the cost of providing replacement vehicles significantly increased over the period, rising by nearly 50 percent between 2019 and 2023, from £473million to £699million.

This increase in cost also accounted for about 10 percent of the overall rise in claim costs during this period.