UK motor insurers to make sizeable losses in 2026

• UK motor insurers set to only break even this year, with an NCR of 101%, following a profitable 2024
• Losses are expected in 2026, with an NCR of 111% forecast, as claims costs rise faster than premiums
• Premiums forecast to fluctuate over 2025 and 2026; consumers expected to save £39 across the period

Following a profitable 2024, the UK motor insurance market is expected to only break even in 2025, and be loss-making in 2026, according to EY’s latest analysis.

Following a net combined ratio (NCR) of 97% in 2024 – the first time the motor insurance sector achieved underwriting profitability since 2021 - NCRs of 101% and 111% respectively are forecast for the next two years. This means that for every £1 earned in consumer premiums in 2025, the sector is forecast to pay out £1.01 in claims and expenses, rising to £1.11 in 2026. This compares to 97p in 2024.

The deteriorating outlook is driven primarily by continued inflation and falling premiums over the course of the year. After a period of stability in 2024, many insurers lowered rates to keep up with competition. Now with high repair costs, more expensive car technology and inflation all driving up claims costs again, these falling premiums are squeezing insurers’ margins.

Premiums expected to fall 10% in 2025, but tick back up to 3% in 2026, overall saving motorists £39 in the two-year period

Following a rise of 14% in consumer premiums in 2024 – as firms increased rates to reflect the impact of rising inflation – EY expects consumer premiums to fall by 10% this year, equating to an average saving of £54 per policy. This reduction is higher than anticipated in EY’s last results analysis in June which forecast a 6% drop and reflects favourable claims experience through 2024 and early 2025.

However, premiums are expected to tick back up again in 2026 as inflationary pressures continue, with a forecast premium rate rise of 3% – adding an average £15 back on per policy. 

Despite anticipated premium rate rises over 2026, the industry is expected to fall deeper into the red that year, as escalating claims costs outpace the level of these price increases.

Dan Beard, EY UK Insurance Partner, comments: “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.

“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.”

Notes to editors:

NCR is calculated by ratio of claims and expenses paid out divided by premiums received, excluding investment returns and/or any other income streams.