Claims expert warns insurers that they face a challenging period ahead

UK motor claims inflation payouts have increased by 6% during the first six months of this year.

According to the latest claims benchmarking data from Willis Towers Watson (WTW), published this week, the average motor claim now stands at £5,380.

The research showed that motor claim volumes were low during the Covid-19 pandemic, but the cost of these claims rose. A key factor behind this surge is cyclist accidents.

WTW head of claims consulting Tom Helm said: ”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.

“Understanding this change in [the] mix of claims types during the lockdowns is important because, whilst overall accident frequency was down, an increase in the proportion of higher severity claim types, like accidents with cyclists, has been a key driver behind the latest increase in average claims cost.

”It also means we cannot solely rely on assumptions and patterns of the past to forecast future claims outcomes. Tracking whether this mix fully readjusts in the second half of 2021, as driving levels return to 90% of pre-pandemic levels, will be vital.”

Helm added that there was potential for further claims inflation rises, especially with supply chain issues hitting the motor repair industry.

He warned insurers that the landscape is ”fraught with uncertainties”.

He continued: “Add into the mix the fact that there will be increased volatility of motor premiums in the new year owing to [the] FCA pricing reforms and that remote working continues to impact claims patterns, the trading environment will remain fraught with uncertainties for insurers.”