UK motor insurers expected to remain loss-making in 2026

• After reporting a small underwriting loss in 2025, UK motor insures are expected to report heavier losses in 2026 with an NCR of 108% forecast 
• Written premiums are set to rise by 16% over the next two years as insurers respond to rising claims costs 
• Geopolitical uncertainty and subsequent oil price volatility and supply chain disruption could further weaken NCR by an additional 5-10% 
• As price rises feed through to profitability, some mitigation is expected in 2027 with an NRC of 103% forecast

The UK motor insurance market is forecast to remain loss-making over 2026 and 2027, according to EY’s latest analysis, and the deteriorating outlook is expected to have a knock-on effect on premiums, with rates set to rise over the next two years.

Following a profitable 2024 of 98% Net Combined Ratio (NCR), the market fell back into the red in 2025, with EY estimating a final NCR of 102%. Greater losses are anticipated this year – with an NCR of 108% forecast. The weaker outlook is being driven primarily by premium rate reductions since late 2024, which are now feeding through to earned premium, alongside continued claims inflation.

Although claims frequency is expected to remain broadly stable, ongoing pressure from repair, labour and vehicle costs and lower earned premium are likely to continue to squeeze motor insurance margins over the next two years. However, with premium rate increases providing some mitigation, an NCR of 103% is forecast for 2027.

Overall, for every £1 earned in premiums, the sector paid out around £1.02 in claims and expenses in 2025 and is forecast to pay out around £1.08 in 2026 and £1.03 in 2027.

Motor insurance premiums expected to rise 16% over the next two years

After premiums fell by almost 12% during 2025, EY expects motor insurance premiums to increase by 4% in 2026 and a further 12% in 2027 as insurers respond to continued claims cost pressure.

EY expects total net claims to increase by 4% in 2026 and 5% in 2027. While the number of claims is expected to remain broadly stable, the average cost of each claim is rising.

Geopolitical uncertainty adds short-term pressure to inflation and supply chains

Ongoing tension in the Middle East could materially affect insurer profitability. Increasing oil price volatility and supply chain disruption will likely create additional pressure on repair, parts and logistics costs, with the potential for NCRs to increase by an additional 5-10%.

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

“Looking ahead, the shape of the motor insurance market is changing - becoming more polarised, with the gap between stronger and weaker-performing insurers widening, and in response to recent M&A activity and increasing consolidation. How insurers respond to these market changes will be critical in the second half of 2026 and beyond, as they look to scale, strengthen capabilities and improve resilience in a more challenging operating environment.”

EY’s recent M&A analysis found that UK insurance deals increased from 40 in H1 2025 to 55 in the first half of 2026, with disclosed deal value rising from £1.6bn to £8.4bn.

Section 3: Notes to editors:

*NCR is calculated as the ratio of claims and expenses paid out to premiums received, excluding investment returns and any other income streams.