– Premiums dip in 2025, but gains likely short-lived as claims costs surge
– Insurers face fresh losses in 2026 amid inflation and market pressure
– UK motor sector treads water – but stability hangs by a thread
– Premiums dip in 2025, but gains likely short-lived as claims costs surge
– Insurers face fresh losses in 2026 amid inflation and market pressure
– UK motor sector treads water – but stability hangs by a thread
Insurers expect to only about break even this 12 months – but fear sliding in to the red in 2026 as rising claims inflation, falling premiums and fierce market competition take their toll, in line with evaluation from EY.
The sector is forecast to post a Net Combined Ratio (NCR) of 100% in 2025, meaning for each £1 in premium income, insurers pays out exactly £1 in claims and expenses.
That’s a narrow escape after returning to profit in 2024, with an NCR of 97%, following three years of losses. But things are set to worsen in 2026, with an NCR of 107% predicted – firmly back within the red.
A combination of falling premiums, persistent inflation, and uncertainty stemming from industry consolidation and tariff-linked trade disruption is driving the shift.
Motorists will see premiums dip 6% this 12 months, saving around £35 per policy, as insurers cut rates on the back of last 12 months’s stronger-than-expected claims performance.
But any relief can be short-lived: a 5% hike is anticipated in 2026, adding £25 back on – a net saving of just £10 across the 2 years.
Dan Beard, UK insurance partner at EY, warned that 2025 could possibly be a “calm before the storm” moment.
“Following only one 12 months of underwriting profitability within the last three, UK motor insurers are once more bracing for challenge in an increasingly uncertain market. The rapidly changing geopolitical, economic and regulatory picture, alongside increasing levels of consolidation, are posing very real challenges.”
He added that the sector faces a fragile balancing act: “Insurers can be keenly aware of the necessity to proceed to support customers with higher propositions whilst rigorously managing costs and delivering on regulatory commitments.”
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