Brace for Impact: Motor Claims Inflation Reaccelerates

Motor claims inflation has traditionally tracked above Consumer Price Index (CPI) and remains one of the most acute pressures facing the UK retail insurance market. Inflation rose exponentially post-COVID but had begun to stabilise over the last 12 months as disruption to the supply chain eased and market conditions began to normalise. In the UK retail motor market, the average private car insurance premiums dropped by 10% during 2025 as the market priced in expected claims severity and frequency benefits ahead of their full realisation.

However, motor inflation is highly susceptible to economic shocks with the supply chain remaining vulnerable and dependent on geo-political stability. In recent months we have seen issues relating to production of semi-conductors, and the impact from the licencing of rare earth materials, which are used in Electric Vehicle (EV) batteries and other parts. Those issues have largely improved through political solutions with no extraordinary impact on pricing.

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