Motor Insurance Premiums Lag Claims Inflation

According to investment bank Jefferies analysts, UK auto insurance premiums are still behind claims inflation.

According to Jefferies’ own tracker, which is based on monthly ONS data, motor insurance rates were +9.5 percent higher in June 2022 year over year.

Although this is encouraging, new business prices continue to trail claims inflation, which analysts estimate to be +12% for Sabre and +10% for DLG.

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According to Jefferies’ tracker, the price of used cars, as well as increased costs for car parts and repairs, contributed significantly to the +12% year-over-year increase in car damage inflation in June.

Analysts claim that second-hand car inflation has slowed down, with prices now +15 per cent higher year over year compared to +23 per cent last month.

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Motor Insurance Premiums Lag Claims Inflation

Yet, this has been partially offset by the cost of spare parts and the cost of hiring a car which are both more expensive compared to last month.

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Jefferies analysts concluded that UK motor insurers continue to be significantly impacted by current market dynamics.

Jefferies said: “Regardless of how disciplined an underwriter is at pricing risk, it is clearly very difficult to avoid a significant margin deterioration given the rate at which inflation has accelerated year to date – as demonstrated by recent profit warnings from both Sabre and DLG.

“This is made even worse given that the market overall is still failing to adequately adjust pricing for rising claims costs.

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