For much of the past two years, the UK motor market has taken cautious comfort from declining claims frequency. Fewer reported accidents have eased short-term loss ratio pressure. Whether that represents a lasting shift is less certain.
“If you look at our data and most industry data, between 2023 and 2024 claims frequency dropped, the number of claims fell, and that continued between 2024 and 2025, although not to the same extent,” said Martin Hall (pictured), managing director at ERS.
The trend is evident. Whether it reflects structural change or temporary conditions remains open.
“There is no single reason for this; it is a cumulative effect of several factors,” Hall said.
Safer vehicles equipped with advanced driver assistance systems have reduced lower-value collisions. Hybrid working has reshaped traffic flows, softening traditional peak patterns. The driver mix has also shifted, with a backlog in driving tests slowing the entry of newly qualified motorists and sharply rising premiums in late 2023 and through 2024 pricing some younger drivers out of the market.
Pricing itself has influenced behaviour. “Customers have a lower propensity to make small claims because they know it will impact their no-claims discount and push their premiums even higher,” Hall said.
Some of the earlier frequency benefit may now be easing as office attendance gradually increases. For brokers, the question is how much of the recent improvement was cyclical rather than structural.
“In motor insurance you always have two big factors: the number of claims (frequency) and the cost of those claims (severity),” Hall said. “The cost of claims is counterbalancing the fall in frequency, because there is always some level of claims inflation.”
Repair inflation and labour costs remain elevated. Electric vehicles are adding further pressure. “Electric vehicles are inherently more expensive to repair,” Hall said. “If the vehicle is written off, the cost is around 20% higher, and repairs are probably about 25% more expensive.”
Longer repair times, specialist skills and parts availability all contribute to rising average claim costs.
Mobility patterns are also evolving. Changes in ownership, growth in short-term cover and alternative transport options are introducing different claim types and legislative considerations. For brokers, vehicle mix, geography and usage assumptions are becoming increasingly material to pricing accuracy.
Industry forecasts suggesting a combined operating ratio of around 100% in 2025 indicate underwriting is delivering little more than break-even performance. Looking ahead, projections of 110% in 2026 sharpen the warning.
“That tells you that, on average, the market is not charging enough for the risks it is writing,” Hall said.
Vehicle supply dynamics compound the pressure. Reduced manufacturing during the Covid period has left a shortage of three- to five-year-old vehicles entering the used market, pushing up prices in that segment. In a tighter economy, consumers are also turning to older petrol vehicles as cheaper replacements, driving inflation in the 10- to 15-year bracket.
“All of this creates inflation in motor insurance,” Hall said. “Ultimately, if the cost of claims goes up, premiums need to go up to counterbalance it. I think you will see rates rising as 2025 progresses into 2026.”
Fraud remains a parallel risk in tougher economic conditions, even as insurers improve detection and front-end data controls.
While behavioural shifts have influenced recent experience, Hall was clear about the dominant driver. “On balance, it is more about macro factors,” he said.
Inflation, supply chain fragility and global manufacturing dependencies continue to shape repair costs and vehicle pricing. The recent dip in frequency offers context, not comfort. In the end, it is the economics of repair, supply and inflation that will determine where motor pricing goes next.
