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Rising Costs: How Inflation and Claims are Impacting Insurance Premiums

Inflation in the UK, coupled with turbulent global events like Covid-19, Brexit and the war in Ukraine, has put pressure on insurance premiums. Customers have been facing double-digit rises in both motor and home insurance costs.

However, even these rising premiums are not keeping pace with ballooning claims costs. Repairs, replacement vehicles, accommodation and more are considerably pricier. Insurers are striving to strike the delicate balance between covering claim costs and keeping policies affordable.

Motor Insurance Feeling the Pinch

For motor insurance, premium hikes of lag behind claims increases. Specific cost surges include:

  • Repairs up 46% with complex electronics and technology

  • Replacement vehicles up 52% amid used car price surges

  • Rental vehicle costs rising with long waits for parts

  • Theft payouts up 53% with pricier second-hand cars

Insurers tout green parts as a cost-saver, with recycled components costing up to 75% less than new. However, advanced safety features require intricate, customised repairs. This complexity has added time and expenses to the claims process across the board.

Properties Also Face Spiraling Costs

On the property side, household premiums have risen 10%, while claims are up 11%. Supply chain struggles worldwide continue to hit construction and materials industries. Shortages and rising costs in shipping, transport, fuel, labor and more translate to higher rebuild costs.

Businesses must monitor asset values and replacement costs closely. Keeping insured values up to date is crucial for full reimbursement after a loss. With inflation persisting at decades-high rates in many countries, adjustments will demand vigilance in the months ahead. We are finding significant underinsurance issues out in the field.

Weathering the Storm

In these turbulent times, insurers and brokers must stand by customers. We aim to offer expertise, reassurance and value. Technological advances can help streamline repairs and claims. With innovation and understanding, insurers hope to temper rising premiums while adequately covering our clients.

The road ahead remains filled with challenges, but by working together, we can navigate toward calmer waters. Our team at Keep Insurance Brokers remain dedicated to serving your needs with competence and compassion. Please reach out with any questions or concerns.


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