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UK motor claims inflation on the rise – WTW

18th July 2022 - Author: Daniel Jackson

The inflation rate for motor claims settled in 2021 was over 6%, far higher than last year’s UK general inflation rate of 2.1%, according to new data from WTW.

carsThe average cost per claim in 2021 was £5349, up from £5037 the previous year. However, a combination of rising accident frequency after the pandemic, global inflation, higher used car prices, and ongoing supply chain constraints pushing up repair costs, is likely to force a sharp correction in 2022.

The company warns that UK motor claims inflation is expected to accelerate in 2022. Its analysis indicates that a slowdown in the average time taken to settle claims, due to disruption caused by the pandemic, has until recently acted as a temporary brake on claims inflation.

Tom Helm, Head of Claims Consulting at WTW, said: “The fall in motor insurance claims during the pandemic has been widely reported, but less well understood is the bottleneck of bodily injury claims that are taking insurers longer to process due to issues such as delays in medical reports.”

“It has inevitably been a challenge for injured parties to be examined and treated due to COVID-19 restrictions and this has led to claims processing times taking longer than at any point over the previous four years.

Stratumn, by SIA Partners

“This delay in bodily injury settlements meant that settlements in 2021 had a distinct bias to lower cost ‘vehicle damage only’ claims, temporarily preventing a sharper spike in claims inflation.”

The average claim settlement time slowed down from April 2020 during the first lockdown. By the final quarter of 2021, the process was taking two months longer compared to the same period in 2019.

Other findings from the WTW data release include that London now takes the top spot from the North West as the region with the highest average cost per claim, at £6,189 in 2021. The sharpest rise in claims inflation took place in the East of England, which has now risen by 23.6% between 2019 and 2021. And the cost to insurers to settle a customer’s vehicle accidental damage claim has increased by 20% between 2019 and 2021.

Tom Helm said: “Since the whiplash reforms went live on 31 May 2021, the new process has reportedly faced a number of teething problems, exacerbating the slowdown in injury settlement times. However, there are signs a lower average cost is starting to materialise for whiplash claims.”

“Assuming this trend continues as a wider distribution of tariff cases settle via the portal as it matures, the reduced frequency and cost of these whiplash claims should help to offset some of this year’s increase in settled spend that will inevitably flow from the delayed settlement of severe injury claims that have occurred during the last two years.”

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