- UK insurers anticipate larger losses in 2023 than previously expected, with an NCR of 114.6% forecast (up from 108.5% forecast in June), due to high inflation, material and claims costs
- Challenging economic conditions persist into 2024, but performance to improve with a forecast NCR of 100.4%
- Consumer premiums expected to rise 25% over 2023 and a further 10% in 2024, as insurers adjust pricing to reflect inflation impact
The UK motor insurance market is expected to record its worst performing year since 2010 this year, according to EY’s latest UK Motor Insurance Results. A net combined ratio (NCR) of 114.6% is now forecast for motor insurers in 2023 – up from 108.5% forecast in June – despite premiums rising by 25% over the course of the year. The losses are driven by high inflation and rising material costs having a more determinantal impact on balance sheets than initially anticipated, and more frequent claims.
Cost pressures and high damage claims levels are expected to continue into 2024, and insurers are likely to face another challenging year. However, premium rate increases this year should start to make a material difference, and EY predicts an NCR of 100.4%ꞌ next year.
Martina Neary, UK Insurance Leader at EY, comments: “The last two years have been amongst the most difficult the motor insurance sector has faced in recent times. The culmination of high inflation, growing material and labour costs, supply chain issues, pricing reforms, and changing driving habits post-pandemic has resulted in the sector recording consecutive years of losses – with 2023 recording the highest loss in over a decade.
“While economic challenges are expected to ease in 2024, headwinds for both insurers and consumers will remain. This means 2024 will be a balancing act for UK insurers. However, the sector remains focused on doing the right thing, and will continue to support consumers while managing costs carefully. In addition, insurers should continue pursuing tech and sustainability transformation, and keeping pace with regulatory change – with IFRS17 and Consumer Duty being particular focuses into next year.”
Premiums increased by 25% in 2023 (£118 per policy)
Cost pressures and sustained high inflation are driving an increase in premium rates, and consumers will have seen their premiums rise by up to 25% over the course of this year – a rise of £118 on average per policy. A further rise of 10% is forecast in 2024 (£58 per policy on average).
Martina Neary concludes: “While many consumers expected premiums to rise, the level and pace of the increase is much higher and sharper than many expected. The current economic environment is of course difficult for both consumers and for firms but as inflation starts to fall back, conditions for consumers and insurers alike should improve.”
Notes to editors:
ꞌ Many insurers have moved to an IFRS17 accounting basis during 2023; in particular this basis now includes an allowance for the impact of discounting (i.e. investment returns) in their insurance results. EY’s results are on an IFRS 4 basis so do not reflect the impact of changing investment returns.
