Motor claims inflation surges 8.6%

UK motor claims payout inflation surged by 8.6% in 2018, taking the average cost per claim to £4,791. Analysts in Willis Towers Watson’s Claim Metrics benchmarking unit say the sharpest rise took place in Wales and the North East at 22.4% between 2016 and 2018. The region with the highest average cost per claim (at £5,403) in 2018 was for the second year running North West England.

This latest annual rise in claims inflation represents the fourth consecutive increase in the average cost per claim, which has now risen by £760 since 2016. Gross accidental damage and third-party property damage are increasing at the fastest rate, with accidental damage claims inflation rising by 13.6% in 2018.

Head of claims consulting at Willis Towers Watson, Tom Helm says while accident volumes are stable, the cost of settling claims continues to climb. “A combination of factors are driving this trend, including rising vehicle repair costs as cars become ever more high-tech, increasing repair complexity, a spike in theft claims and ongoing fraud which, together with market dynamics, are influencing gross damage and associated costs,” he said.

“The 8.6% inflation on attritional claims is compounding pressure on motor insurance premiums, particularly given wider market issues such as the unexpected outcome on the Ogden discount rate change announced in July.”

Helm says he expects claims inflation to rise further in 2019, blaming Brexit and its potential impact on the cost of imported parts. "As a result, the trading environment will remain challenging for an industry already going through significant transformation, driven by rising customer expectations and a new wave of digital-first competitors disrupting the market. Increasing efficiency and improving claims handling accuracy will prove decisive in such conditions," he explained.

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