Motor insurance market facing challenging 2026
New research from EY has predicted that the UK motor insurance market will make a loss next year, after just breaking even in 2025.
After recording a net combined ratio (NCR) of 97% in 2024, it is expected to slip to 101% this year before falling further to 111% in 2026.
This means that for every £1 received in motor premiums, insurers will pay out £1.11 in claims and expenses.
The deteriorating outlook is being driven primarily by falling premiums – down by 10% this year – and higher repair costs.
Challenging market
Dan Beard, EY UK insurance partner, said: “UK motor insurers are once again facing the prospect of losses in an increasingly challenging market, with geopolitical, economic and regulatory changes and escalating consolidation all impacting portfolios.
“The outlook has deteriorated further than expected over recent months due to the return of inflation and higher than expected premium rate reductions. Our forecasts assume no reserve movements, so there is potential for some offsetting for insurers who have been cautious in reflecting recent periods of positive experience.
“While lower premiums in 2025 will be welcome news for motorists, reduced income growth will negatively impact insurers’ balance sheets.”
Transformation
“Despite these challenges, the UK motor insurance industry is poised for significant transformation driven by shifting consumer preferences, in particular the continued rise of electric and hybrid vehicles, as well as technological change.
“Going forward, it will be crucial for insurers to make the necessary strategic adjustments, while managing risks and maintaining a disciplined approach to pricing, in order to drive innovation, sustainable growth and customer satisfaction.”
