According to latest data from Claim Metrics, the claims benchmarking service from re/insurance broker Willis Towers Watson (WTW), claims inflation increased by 6.1% for UK motor insurers during first half of 2021.
Whilst lockdowns up to the beginning of Q1 2021 led to a drop in motor claim volumes, including unprecedented lows in some months, WTW found that the cost of settling claims continued to increase during the pandemic.
The H1 2021 figure compares to an inflation rise of 10.8% during the full year 2020, and brings the average cost per claim (ACPC) to £5,380.
WTW notes that Accidental Damage (AD) has increased at the fastest rate over the last 18 months, with AD claims inflation rising by 8.2% during H1 2021 and by 8.4% in 2020.
“The cost of settling claims continues to climb despite driving behaviour changing dramatically during the pandemic. The second quarter in 2020 saw the greatest impact from lockdown with a substantial change in the types of accidents arising,” said Tom Helm, Head of Claims Consulting at WTW.
“The proportion of claims that were hit-in-rear accidents fell sharply by seven percentage points, despite previously accounting for about 21% of all UK claims. Meanwhile, cyclist claims, which are typically more costly but low in volume, more than doubled their normal share of the overall claim numbers in the same period,” Helm continued.
“Understanding this change in mix of claims types during the lockdowns is important because, whilst overall accident frequency was down, an increase in the proportion of higher-severity claim types, like accidents with cyclists, has been a key driver behind the latest increase in average claims cost.”
WTW data also shows a wide variance in the rate of claims inflation between UK regions, with a difference of seven percentage points between the fastest and slowest increasing regions, with London leading the way at 9.9%.
Helm further stated: “Claims inflation has the potential to rise further in 2022 driven by a combination of factors, including widespread supply chain issues affecting many industries such as automotive repairs. With inflationary pressures expected to intensify further due to rising used car prices impacting total loss settlement costs, the impact of the Whiplash Reforms should be closely monitored for early signs of the measures’ ability at least partially to offset this rise in vehicle damage costs.”
