Sponsored content: Stephen Kennedy, director at Pearson Ham, discusses the nuanced shifts in the personal motor market’s pricing cycle
After five turbulent years for UK motor insurers and customers, the pricing cycle is shifting again. Premiums have been falling for roughly two years, following the sharp rises that peaked in late 2023.
The latest Pearson Ham price index put the average of the top five quoted comprehensive premiums at £426, down 9.6% year on year as of January 2026.
The ABI’s premium tracker also shows declines through 2025, with an average paid premium of £559 in Q4 2025.
However, the balance of evidence suggests the deflationary phase is losing momentum and modest inflation is starting to reappear.
Even while averages were still falling, many drivers were already seeing renewal increases, reflecting how quickly risk and claims costs can impact at an individual level.
Confused.com reported that 42% of drivers renewing between September and November 2025 paid more, up £72 on average. Pearson Ham’s tracker has also reported price increases from most of the larger insurance providers in recent months.
The key driver remains claims costs. Total payouts are large and still pressured by the cost of modern repairs. The ABI reports motor insurers paid £11.9bn across 2.5 million claims in 2025, underlining the scale of underlying cost intensity even as premiums eased.
Cost inflation
Repair inflation has been fuelled by more complex vehicles, higher parts prices, and a shortage of skilled technicians, themes the ABI has highlighted in recent claims data. Alongside repairs, theft severity has been an important contributor and the FCA has pointed to steep increases in theft costs and labour costs in its recent discussion of the motor market.
Why, then, did prices fall through 2024 and 2025? A combination of improved supply conditions, easing from the most extreme inflationary spikes, and competitive pressure as insurers recalibrated after the post pricing peak.
But the fall did not mean the cost base normalised overnight. It meant that the worst of the step change had passed and pricing began to catch up with improved conditions.
For the rest of 2026, the most likely path is a gradual return to premium growth, rather than another surge. UK inflation has eased materially into early 2026, which should reduce pressure on wages, parts logistics and general operating costs over time, limiting how far premiums need to rise on average.
However, claims cost inflation is often stickier than headline inflation, especially where repair complexity, electric vehicle repairability, labour constraints and theft trends remain challenging. The result is a market that looks more normal in its rhythm, but not necessarily cheap.
In short, after two years of deflation, 2026 looks like a turning point: stable conditions, tighter control of extremes and low single digit premium inflation is likely in the aggregate, with wide variation by driver, vehicle and region.
Understanding these variances can provide a competitive advantage, making it crucial to maintain an ongoing view of market movements at a segmented level.
