‘UK motor insurers are navigating a difficult combination of lower earned premium income and persistent cost inflation,’ says partner
UK motor insurers are expected to remain loss-making through 2026, with policyholders facing premium increases of 16% over the next two years as insurers battle rising claims costs, according to Ernst and Young (EY).
The professional services firm’s latest motor insurance outlook, published today (23 July 2026), forecasts the market will record a net combined ratio (NCR) of 108% in 2026, before improving slightly to 103% in 2027.
An NCR above 100% indicates insurers are paying out more in claims and expenses than they receive in premiums.
EY said the deteriorating outlook was being driven by lower earned premiums following premium reductions during 2025, alongside continued inflation in repair, labour and vehicle costs.
As a result, motor insurance premiums are expected to rise by 4% in 2026 and a further 12% in 2027 as insurers seek to restore profitability.
Dan Beard, UK insurance partner at EY, said: “UK motor insurers are navigating a difficult combination of lower earned premium income and persistent cost inflation, with geopolitical tensions adding further complexity.
“Our latest analysis suggests 2026 could be the toughest year of the current soft cycle.”
Geopolitical risks
EY warned that continued tensions in the Middle East could further undermine insurer profitability through oil price volatility and supply chain disruption, increasing repair, parts and logistics costs.
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The firm estimated this could worsen insurers’ net combined ratios by a further five to 10 percentage points.
Beard added: “For consumers, this likely means higher motor insurance premiums over the next two years as insurers look to restore margins.”
Looking beyond 2026, Beard said the market was becoming increasingly polarised as stronger insurers pulled away from weaker competitors amid rising M&A activity.
The firm’s latest M&A analysis, published 6 July 2026, found the number of UK insurance deals increased from 40 in the first half of 2025 to 55 during the same period in 2026, while disclosed deal values rose from £1.6bn to £8.4bn.
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