Payout inflation of UK motor claims increased by over 6% during the first six months of 2021, with an average cost per claim of £5,380, according to claim metrics benchmarking data from Willis Towers Watson.
The lockdowns over most of 2020 and the first quarter of 2021 led to a lower volume of motor claims, including unprecedented lows in some months. However, the cost of settling claims continued to increase during the pandemic. For the full year 2020, motor claims inflation was at 10.8% and 9.5% for 2019.
Accidental damage (AD) increased at the fastest rate over the last 18 months, with AD claims inflation at 8.2% for the first half of 2021 and 8.4% for 2020.
Willis Towers Watson’s Claim Metrics platform, which tracks and analyses claims activity in the personal lines insurance market, has benchmarked over £17 billion of motor claims and over 40% of the UK motor market.
“The cost of settling claims continues to climb despite driving behaviour changing dramatically during the pandemic,” Tom Helm, head of claims consulting, Willis Towers Watson. “The second quarter in 2020 saw the greatest impact from lockdown, with a substantial change in the types of accidents arising. 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.”
Willis Towers Watson observed a wide variance in the rate of claims inflation between UK regions, with a difference of seven percentage points between the fastest and slowest increasingregions. London had the highest claims inflation at 9.9%.
“Add into the mix the fact that there will be increased volatility of motor premiums in the New Year owing to FCA pricing reforms and that remote working continues to impact claims patterns, the trading environment will remain fraught with uncertainties for insurers,” Helm said. “Increasing customer expectations, spurred by the rise of digital-first competitors, continue to disrupt the market, which means efficiency and improving claims handling accuracy will prove decisive in such conditions.”
