Driving Through Inflation: Managing the Rising Cost of Motor Claims

The UK motor insurance market has faced significant challenges in recent years, with increasing premiums, a higher frequency of claims and shifts in the regulatory landscape. One of the key concerns of policyholders is the impact this is having on their Fleet and Personal motor insurance policies.

Claims inflation is trending higher than current economic inflation which is trending at 3.8% as of October, 2025. Claims inflation is the increased economic impact that policyholders are experiencing with motor claims having higher costs than previous years, resulting in higher premiums being charged.

Claims inflation is influenced by various factors of the claims process:

Electric Vehicles

Electric vehicles (EV) are increasingly popular in the UK, with more and more drivers seeking to reduce their emissions and turning to greener alternatives. The technology used in EVs is still modern and complex which is putting pressure on motor claims costs. Minor vehicle repairs are becoming increasingly expensive due to the advanced technology and specification of EVs resulting in claims costs being around 25% more expensive than fuel based motors. Due to the complex issues surrounding the lithium ion batteries and higher spec parts, the average repair time for EVs is increasing and it is taking longer for policyholders to be back on the road. As such, credit-hire fees and storage costs are causing an increase in claims costs and negatively impacting policyholders.

Repair and Labour Costs

As UK inflation rates increase, rising costs are becoming of increasing concern in the motor claims industry. Repair garages and mechanics now have higher value overheads than in previous years resulting in rising labour and repair costs. Whilst UK insurers will utilise ‘approved’ repairers in efforts to combat rising costs, policyholders need to be aware of third party claimants conducting their own repairs. If this isn’t managed by insurers, costs have the potential to increase drastically which will result in higher value claims being submitted.

Supply Chain Disruptions

The volatile global political landscape, namely trade tensions and sanctions is having an adverse impact on the motor industry in the UK, which is burdening the claims process. Specifically, due to the shifting global landscape, supply chains are disrupted with trade routes disabled or unavailable resulting in increased lead times for parts to arrive into the UK. Tariffs have been introduced or increased under new government policies which is increasing the cost of these parts when they enter the UK market. This is resulting in policyholders facing delays and increasing the overall cost of repairs, leading to higher value motor claims.

Personal Injury and Complex Losses

The value of compensation paid out to third parties for their personal injuries as a result of road traffic accidents is increasing, driving up claim costs and prolonging the claims settlement process.

• Over the last 12 months, the value of personal injury compensation awarded has increased by almost 20%. This is a reflection of the current rate of inflation and changes in legal opinions with the grading of general damages.
• Road traffic accidents involving catastrophic injury to drivers and third parties are becoming more frequent. This is resulting in injuries that include spinal damage, brain trauma, etc., which require long-term medical care and rehabilitation which is increasing the cost of claims.
• Due to the complexity of injury claims, legal representation is often required which increases the value of claims settlement due to the addition of fees. Complex cases, combined with rising fees due to inflationary pressures is impacting the policyholder due to high costs applied at claims settlement.

Best Practice to Mitigate Rising Claims Costs

There are certain steps policyholders can take in terms of storing and maintaining their vehicle to reduce any potential claims costs:

• Secure and maintain your vehicle, install Thatcham-approved alarms, tracking devices, etc., and consider parking securely at home or in well-let areas to deter would be thieves and vandals.
• Consider the use of dashcams, to collect clear evidence of the event to assist insurers with their assessment of the claim.
• Ensure your vehicle is maintained; any underlying damage has the potential to negatively impact on your claims experience. This is because any unknown damage may prolong repair works following an accident and will result in increased costs, and higher credit hire fees if your vehicle is off the road for a longer period than anticipated.

What should you do when a claim occurs:

• Collect evidence – images of the scene, including clear images of your vehicle, third party vehicles, the damage sustained. Try to include images of the condition of the road and any relevant road signs and markings.
• Request third party details, including personal contact details, vehicle registration and their insurance details.
• Obtain witness information, specifically their contact details so they can assist in providing evidence.
• Report all accidents to your insurers as soon as practicably possible. Delays in the reporting process can have detrimental impacts on the claims management process.
• Use approved repairers where possible. This can positively impact claims costs, and may assist in reducing the value of uninsured expenses.

If you have any questions, please get in touch.