Motor premiums to rise as insurance losses mount
The motor insurance industry is expected to make a loss this year and next, leading to higher motor premiums.
The sector reported a profitable 2024 with a 98% net combined ratio, but that slipped to 102% last year and the latest analysis from EY is now predicting a net combined ratio of 108% this year and 103% next year.
Claims frequency is expected to remain stable, with losses incurred as result of higher repair costs and rising labour rates.
As a result, it expects motor insurance premiums to rise 16% over the next two years. Premiums fell by 12% in 2025 but rises of four per cent and 12% are predicted for the next two years.
Profitability
Dan Beard, UK insurance partner at EY, said: “UK motor insurers are navigating a difficult combination of lower earned premium income and persistent cost inflation, with geopolitical tensions adding further complexity.
“Our latest analysis suggests 2026 could be the toughest year of the current soft cycle, with profitability coming under further pressure, before some expected improvement in 2027 as pricing actions feed through. For consumers, this likely means higher motor insurance premiums over the next two years as insurers look to restore margins.”
