New figures from the Office for National Statistics’ (ONS) Annual Survey of Hours and Earnings (ASHE) show a stronger-than-expected rise in care worker pay, adding pressure to UK motor insurers and reinsurers managing Periodic Payment Order (PPO) liabilities.
The ASHE dataset, published annually each October, is the UK’s key reference for wage inflation and is used across the insurance industry to adjust long-term injury claim payments. For PPOs, which are court-ordered settlements that require insurers to make lifelong, inflation-linked payments to seriously injured claimants, the 80th percentile of carers’ gross hourly earnings forms the benchmark for annual uplifts.
This year’s ASHE data shows the 80th percentile rate increased by 7.25%, from £15.03 to £16.12, marking the highest rise since the PPO indexation methodology was established. The increase exceeds last year’s 4.2% and the 7% recorded in 2023, outpacing both consumer and wage inflation in the wider economy.
Cormac Bradley (poictured), senior actuarial director at Broadstone, said the rise will have immediate financial consequences for insurers. The 7.25% uplift, he noted, directly raises PPO payment obligations, outstripping the CPIH inflation rate of 4.1% and median weekly earnings growth of 5.3%.
“For motor insurers and reinsurers, this 7.25% uplift directly increases the annual cost of PPOs,” Bradley said, adding that it highlighted the volatility inherent in care sector wages and the ASHE methodology itself. “This will exceed most insurers’ expectations and will have immediate implications for reserving, reinsurance pricing and capital adequacy.”
Bradley also noted that while the number of new PPO settlements has remained relatively low, the cumulative effect across existing portfolios is substantial. The surge in the ASHE benchmark underscored the risk of volatility for actuaries and capital managers who had expected more stability in care sector earnings.
Insurers are now expected to revisit reserving assumptions, stress-test capital models, and adjust reinsurance programmes to account for the renewed uncertainty.
The ONS data, which reflects broader pay pressures in the health and social care sector, serves as a reminder of how wage inflation can materially affect long-tail insurance liabilities, particularly those linked to lifelong personal injury compensation.
