UK motor insurers break payout records as the sector battles rising cost
Insurance companies have paid out £2.5bn in motor insurance claims in the third quarter of the year, which was a 21 per cent jump on the same period last year.
Over the third quarter of 2023, UK insurers have issued the highest quarterly payout since the Association of British Insurers (ABI) began collecting this data in 2013.
The ABI new data shows that the overall number of claims settled was 570,000, which is a 5 per cent increase on the same quarter last year.
The report highlighted the cost of vehicle repairs jumped 32 per cent to a quarterly record £1.6bn. As some insurers have reported over the last quarter, the increase of 16 per cent for materials, 15 per cent for labour and 46 per cent for other costs, largely driven by the price of energy.
This comes after a report in June highlighted that car insurance costs were set to rise for the next two years as inflation was driving up the price of car repair costs.
Earlier this year, a report by EY, highlighted that the UK motor insurers delivered their worst performance in a decade, last year. The report highlighted that insurers that specialise in providing motor coverage, were hit hard by rising claims costs, as the cost of second-hand cars, parts and labour have all rose, eroding insurers’ margins.
EY highlighted that 2022 was a difficult year for the motor insurance sector, but it was set to continue throughout 2023.
Speaking to City A.M. an ABI spokesperson said: “Insurers are very aware of the pressure that the rising cost of living is putting on households and continue to do all they can to offer competitively priced motor insurance. Like most other sectors, motor insurers are facing rising costs, often running well above the general rate of inflation, which they are finding increasingly challenging to absorb.”
They explained: “For example, average repair costs have risen 32 per cent in the last year, with average replacement vehicle costs up 47 per cent. A report from analysts EY highlighted that motor insurers pay out almost £1.11 in claims and expenses for every £1 in premium, and 2022 was the sector’s most challenging year in a decade.”
“Anyone concerned about being able to afford their motor insurance should speak to their insurer to see what options might be available,” the spokesperson added.