The Financial Conduct Authority (FCA) published a review for the Government’s Motor Insurance Taskforce analysing why UK motor insurance premiums have risen, with a focus on claims costs. The FCA’s central finding is that premium increases have largely been driven by higher claims costs, and it sets out proposed actions and recommendations for government, industry and other stakeholders aimed at improving affordability. Analysis of data from 12 insurers representing over 50% of the UK private motor market shows total claims costs rising 34% between 2019 and 2023 (from GBP 6.8bn to GBP 9.1bn), while average claim cost increased 37% (to GBP 3,293) and average written premium rose 23% (to GBP 545), with average premiums reaching GBP 619 in H1 2024 for the sample. Accidental damage and property damage accounted for 65% of the increase in total claims costs, driven by higher vehicle values and complexity, longer repair lead times and repair durations, parts and labour shortages, and higher labour and parts costs. The review flags higher costs associated with third-party involvement in claims handling (including accident and claims management companies) and credit hire and repair practices, noting higher cost growth for non-General Terms of Agreement credit hire claims (62% from 2019 to 2023) than for GTA claims (47%). It also points to rising average bodily injury claim costs (up 81% despite lower volumes), materially higher theft costs (claims costs up 79% to GBP 533m), evolving fraud risks (including ad spoofing, ghost broking and use of generative AI), and higher uninsured-driver costs via the Motor Insurers’ Bureau, with uninsured-driver claim costs rising from GBP 329m in 2019 to GBP 452m in 2024 and the levy rising from GBP 331m to GBP 507m. Engagement with the Motor Insurance Taskforce, the Association of British Insurers, insurers and other bodies is intended to agree how to take forward the FCA’s proposed actions and recommendations, including measures focused on repair capacity and supply chains, tighter claims cost control and challenge of unreasonable third-party costs, potential interventions in replacement vehicle and bodily injury trends, theft and fraud deterrence, and steps to reduce uninsured driving.
Financial Conduct Authority 2025-07-21
United Kingdom's Financial Conduct Authority publishes motor insurance claims cost review with recommendations to improve affordability
The Financial Conduct Authority (FCA) reviewed the Government’s Motor Insurance Taskforce, noting UK motor insurance premiums have risen due to increased claims costs. Total claims costs rose 34% from 2019 to 2023, driven by higher vehicle values, repair complexities, and labour shortages. The FCA proposes actions to improve affordability, focusing on repair capacity, claims cost control, and fraud deterrence.