Motor insurance claims inflation in the UK increased by 6.2% in 2021, dramatically higher than the previous year’s UK general inflation rate of 2.1%, according to WTW’s latest Claims Metrics benchmarking data.
WTW’s Claims Metrics service is supported by the insurance giant’s Insurance Consulting and Technology team to provide advisory services integrated with leading-edge technology solutions and software, underpinned by unparalleled analytical capabilities and infrastructure. Its data is based on claims settling between £150 (£500 PI) and £100,000, excluding windscreen claims.
The latest Claims Metrics data showed that motor claims payout inflation in 2021 took the average cost per claim (ACPC) to £5,349, up from £5,037 in 2020. But that’s not the end because WTW expects a sharp rise this year due to increasing accident frequency after the COVID-19 pandemic lockdowns, surging global inflation, elevated used car prices, and ongoing supply chain constraints pushing up repair costs.
Tom Helm, head of claims consulting at WTW, said the pandemic resulted in delays in medical reports, so insurers took longer to process bodily injury claims. Specifically, the average claim settlement time slowed down from April 2020 during the first COVID-19 lockdown. By the final quarter of 2021, the claims process took two months longer than the same period in 2019.
“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. 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,” Helm said.
Settlement time for bodily injury claims took the biggest hit from the pandemic, increasing by seven months on average and now taking over two years to complete.
With the whiplash reforms commencing from May 31, 2021, the new claims process has reportedly faced a myriad of teething problems, exacerbating the slowdown in injury settlement times, Helm said.
However, he noted signs that a low average cost is beginning 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.”
