Car insurance payouts to keep rising after hitting record £11.7bn last year
However, the group still expects rates paid by customers to fall thanks to a competitive market backdrop, thereby putting further pressure on insurers' margins.
EY analysts forecast the average cost of motor insurance claims to rise by around 6 per cent in 2025 and 2026, with damage inflation staying high and bodily injury inflation within the 3 to 5 per cent long-term range.
Motor claims hit a record £11.7billion in 2024, according to the Association of British Insurers, with the average claim up 13 per cent year-on-year at £4,900.
The predicted increase comes despite a 'significant decline' in the frequency of claims, EY said.
It credited this to better car safety, lower speed limits, workplace behaviour changes, and even a reluctance among motorists to make claims as a result of greater insurance costs in the UK.
EY expects motor insurers' margins to hit breakeven levels this year before slipping into an underwriting loss of around 107 per cent in 2026 as rates lag behind claims inflation.
A combined operating ratio (CoR) exceeding 100 indicates that insurance companies are making an underwriting loss, while a ratio below that figure denotes a profit.
The UK motor insurance industry had a CoR of 97 per cent in 2024, despite paying out a record £11.7billion in claims.
This was still a considerable improvement on the 113 per cent recorded the previous year when soaring claims, labour and parts costs outpaced the growth in premiums.
New business rates in the UK car insurance sector shrank by 14 per cent to £757 last year, according to the Confused/WTW Motor premium index.
It noted that the rates of decline had slowed from 7 per cent in the first quarter to 2.6 per cent in the following three months.
WTW suggested this could be the result of greater consolidation in the UK motor insurance market.
Aviva is likely to finalise the £3.7billion takeover of Direct Line Group, which is home to Churchill Insurance and vehicle recovery provider Green Flag, in July following approval from the UK's Competition and Markets Authority.
Belgian insurer Ageas also agreed in April to acquire Esure from private equity giant Bain Capital in a £1.4billion deal that will create Britain's third-largest home and motor insurer.
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Reuters
15 minutes ago
- Reuters
EU's $250 billion-per-year spending on US energy is unrealistic
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Daily Mail
15 minutes ago
- Daily Mail
Trump warns against second independence vote for 75 years
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'I am making the point that, having established that precedent, we must be in a position to be able to give the people of Scotland the choice about their constitutional future. 'There is now, by the time we get to 2030, going to be a million people who were not eligible to vote in the last referendum in 2014. 'A generation has now passed and I want to make sure that people in Scotland who want our country to have a choice about independence are able to do so in a democratic and legitimate fashion that can enable the establishment of an independent country as a consequence of a Yes vote. 'And the way to do that is the way we did it in 2011, which is to elect a majority of SNP MSPs to the Scottish Parliament.' In the 2014 vote, 55 per cent of Scots voted No and 45 per cent Yes. Scottish Conservative deputy leader Rachael Hamilton said: 'It's patently absurd - and John Swinney knows it - to claim that 11 years constitutes 'a generation'. 'John Swinney is like a broken record. 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Reuters
an hour ago
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Trump and Starmer trade compliments but defend differences
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