Total retail premiums written by UK motor insurers fell from £21.0 billion to £19.5 billion in 2025, a drop of around £1.5 billion or 7%, according to the Financial Conduct Authority's latest General Insurance Value Measures data, published today and covering the full 2025 calendar year.
Despite the fall in premium income, the average number of policies in force rose from 32.8 million to 34.1 million, pointing to lower average premiums and an easing of the pricing pressure that has weighed on the market in recent years.
Claims frequency edged down slightly, from 9.6% to 9.3%, while claims acceptance rates held high at 98.7%. The average claims payout rose from £3,764 to £3,858, and as a result the proportion of premiums paid out in claims climbed sharply, from 54.2% in 2024 to 59.1% in 2025.
Cormac Bradley, senior actuarial director at Broadstone, described the figures as a welcome shift for motorists after several years of steep price rises. The rise in policies in force alongside lower premium income, he explained, suggests affordability has improved as the exceptional claims inflation of recent years begins to ease.
At the same time, insurers are paying out a greater share of premium income in claims, with average settlements continuing to climb. "While pricing conditions have improved for consumers, the underlying cost of motor insurance remains high and insurers will remain cautious about how far premiums can fall from here," Bradley said.
Motorists should benefit from a more stable pricing environment, he added, though pressure from repair costs, labour shortages and increasingly sophisticated vehicle technology means claims costs remain elevated, requiring insurers to maintain pricing discipline.
The FCA's figures echo trends already visible in the ABI's quarterly Motor Insurance Premium Tracker, which put the average price paid for private motor insurance at £560 in the first quarter of 2026, £20 lower than the same period in 2025. Over that quarter, insurers paid out £2.9 billion in motor claims, of which £1.9 billion went on vehicle repairs, up 3% on the previous quarter.
The average accidental damage claim rose to £3,699, up 8%, which the ABI attributed to higher parts prices and the growing complexity of modern vehicles.
The findings also follow December's Motor Insurance Taskforce report, which set out reforms aimed at tackling cost drivers behind motor premiums, including ghost broking, ad spoofing and the handling of non-fault claims.
Bradley called the taskforce's recommendations credible at the time, while cautioning that no single fix existed and that some measures would take time to bear fruit.
The tension between falling premiums and rising claims costs is already visible in insurers' own results. Aviva's UK and Ireland general insurance business reported an undiscounted combined operating ratio of 94.1% for the first quarter of 2026, an improvement of 2.5 percentage points year on year, with the group maintaining guidance for a full-year UK&I COR below 94%.
Not every insurer's motor book is faring as well. Analysts at RBC Capital Markets have flagged that Admiral's UK motor pricing has lagged claims inflation, revising their forecast for the insurer's first-half 2026 combined ratio to 85.6%, weaker than the 84.2% Admiral reported for the second half of 2025, citing softer 2025 rate cuts still working through the book.
For brokers and insurers, the widening gap between falling premium income and a rising claims share suggests a market moving from a hard pricing cycle into a more fragile equilibrium. A 59% claims ratio, against 54% a year earlier, leaves considerably less room to absorb further cost shocks, whether from repair inflation, theft, or regulatory change, without either raising prices again or accepting thinner margins. Insurer results already point to an uneven recovery, with some books improving faster than others.
With repair cost inflation showing no sign of easing and the motor taskforce's reforms still working through the system, the sustainability of 2025's lower premiums looks likely to be tested well before the FCA's next full year of data is published.
