UK motor insurers, including Admiral and Direct Line, are grappling with a continued margin squeeze as premiums drop amid rising claims costs, according to a recent report from Bloomberg Intelligence.
While auto-insurance premiums have dropped 13% since the start of 2024, claims costs are seeing sustained inflation, increasing at an estimated 2% in the year’s first nine months, and with some insurers reporting high-single-digit rises in claims expenses.
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Premiums for high-end vehicles have notably decreased, diverging from the trend of rising repair and replacement costs due to advanced technology in cars.
Kevin Ryan, Senior Industry Analyst (Insurance) at Bloomberg Intelligence, noted that “insurance pricing fell in Q3 for supercars having risen in Q2; it doesn’t reflect either inflation or the expensive technology that’s boosting UK auto-claims costs.”
In October, a 50-year-old insuring an Aston Martin DB9 in central London could pay as little as £960 annually, a 34% drop year-over-year and 9% lower than in July. Meanwhile, insuring a similarly valued Ferrari costs around £653, a 51% decrease year-over-year, according to Confused.com.
However, the gap between premium prices and claims costs continues to widen, raising concerns about sustainability for UK insurers.
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By GlobalDataAssociation of British Insurers (ABI) data shows that the sector has faced challenges in achieving underwriting profits historically, with only four years of profit since 2015, per EY estimates. Advanced Driver Assistance Systems (ADAS) in new vehicles and sterling weakness have further inflated repair expenses, particularly for high-end vehicles with specialised components.
ABI reported that claims costs for UK auto insurers rose by 18% in Q2, totalling £2.9 billion. Ryan highlighted that, despite a year-over-year fall in the average annual cost of auto insurance to £861 in Q3, “premiums have struggled to revisit 2011’s last absolute peak of £857, while the UK CPI transport maintenance and repairs costs index is up 36% since 2017.”
