Car premiums surge 19% in 2022

The research by aggregator Confused in association with broker WTW showed £100 had been added to the average bill during 2022. It is the biggest annual jump for six years.

The fourth quarter rise of 7% means motor premiums have risen for five quarters in a row. The three-month climb showed prices accelerating again given the uplift in the third quarter was 6%.

All regions across the UK recorded double-digit price rises for the full year.

Drivers in Central Scotland and inner London saw the largest percentage increase at 22%.

High inflation

Tim Rourke, UK head of P&C pricing, product, claims and underwriting at WTW, said: “The last 12 months have been characterised by persistently high inflation and insurers adjusting to the new Financial Conduct Authority pricing rules while maintaining margins.

“With supply chain disruption, labour shortages, lack of raw materials and increasing food, fuel and energy prices set to continue, the upward pressure on premiums, primarily driven by claims inflation, is set to continue well into 2023.”

As previously reported by Insurance Age, EY calculated in November that the net combined ratio for the UK motor insurance market in 2022 would come in at 115%. It also forecast further losses in 2023 with an NCR of 114%.

While the UK market made an underwriting profit in 2021, largely due to pandemic-related factors, last year it faced supply chain issues and soaring claims costs. This has hit all key areas including parts, labour, credit hire, paint, car values and availability, and provision of care.

Back in July Sabre warned of surging claims costs as it revealed a more than 10% drop in the size of its motor book. The insurer said at the time it was pricing ahead of the market in response to higher levels of inflation.

In its recent shock profit warning Direct Line detailed that it has already estimated higher motor claims inflation on business already will increase the 2023 group combined operating ratio by approximately two to three percentage points, relative to the target of around 95%.

Volatility

Rourke concluded: “Rising interest rates, along with the prospect of falling inflation over 2023, will help insurers’ overall profitability.

“At the same time, the wider economic environment of falling household incomes, cost of living pressures and volatility in financial markets is expected to affect demand significantly across insurance lines, including motor insurance.

“Insurers will also now have to consider the impact of the recent Court of Appeal ruling on mixed injury claims that seems likely to put further upward pressure on premiums.”

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