LONDON, July 14, 2022 — WTW (NASDAQ: WTW) has today warned that UK motor claims inflation is expected to accelerate in 2022. Analysis by WTW indicates that a slowdown in the average time taken to settle claims, due to disruption caused by the pandemic, has until recently acted as a temporary brake on claims inflation.
Motor claims payout inflation increased by over 6% during 2021, taking the average cost per claim (ACPC) to £5,3492, according to WTW’s latest Claim Metrics benchmarking data3. However, a combination of rising accident frequency after the pandemic lull, surging global inflation, elevated used car prices, and ongoing supply chain constraints pushing up repair costs, is likely to force a sharp correction in 2022.
| 2019 | 2020 | 2021 | |
|---|---|---|---|
| Average cost per claim (gross)* | £4,502 | £5,037 | £5,349 |
| % Change - All motor claims | +9.8% | +11.9% | +6.2% |
Source: WTW Claim Metrics. Figures based on settled claims over £150 and capped at £100k. *Exc. Windscreen claims.
Tom Helm, Head of Claims Consulting at WTW, said: “The fall in motor insurance claims during the pandemic has been widely reported, but less well understood is the bottleneck of bodily injury claims that are taking insurers longer to process due to issues such as delays in medical reports.
“The fall in motor insurance claims during the pandemic has been widely reported, but less well understood is the bottleneck of bodily injury claims that are taking insurers longer to process.”
Tom Helm
Head of Claims Consulting | WTW
“It has inevitably been a challenge for injured parties to be examined and treated due to COVID-19 restrictions and this has led to claims processing times taking longer than at any point over the previous four years. This delay in bodily injury settlements meant that settlements in 2021 had a distinct bias to lower cost ‘vehicle damage only’ claims, temporarily preventing a sharper spike in claims inflation.”
The average claim settlement time slowed down from April 2020 during the first lockdown. By the final quarter of 2021, the process was taking two months longer compared to the same period in 2019. Settlement time for bodily injury claims have been most impacted, increasing by seven months on average and now taking over two years to complete.
Other findings from the latest Claim Metrics benchmarking data:
Tom Helm said: “Since the whiplash reforms went live on 31 May 2021, the new process has reportedly faced a number of teething problems, exacerbating the slowdown in injury settlement times. However, there are signs a lower average cost is starting to materialise for whiplash claims. Assuming this trend continues as a wider distribution of tariff cases settle via the portal as it matures, the reduced frequency and cost of these whiplash claims should help to offset some of this year’s increase in settled spend that will inevitably flow from the delayed settlement of severe injury claims that have occurred during the last two years.”
The Claim Metrics service is supported by WTW’s Insurance Consulting and Technology team, which provides a powerful combination of advisory services, integrated with leading-edge technology solutions and software, including our market-leading business intelligence software, underpinned by unparalleled analytical capabilities and infrastructure.
We have more than 370 Technology colleagues who can potentially provide direct support, including software architects, developers, quality assurance, project management and subject matter experts. This is part of a software development community of over 1,000 Willis Towers Watson software professionals.
Claim Metrics data is based on claims settling between £150 (£500 PI) and £100,000, excluding windscreen claims. Lower values are removed to avoid fees pulling down averages and the £100,000 cap removes the volatility of larger claims. There will be some small variances between cycles reflecting changes in participants.
WTW’s Insurance Consulting and Technology business has over 1,200 colleagues operating in 35 markets worldwide. It is a leading provider of advice, solutions and software – primarily to the insurance industry. Its consulting services help clients manage risk and capital, improve business performance, and create competitive advantage – by focusing on financial and regulatory reporting, enterprise risk and capital management, M&A and corporate restructuring, products, pricing, business management and strategy.
At WTW (NASDAQ: WTW), we provide data-driven, insight-led solutions in the areas of people, risk and capital. Leveraging the global view and local expertise of our colleagues serving 140 countries and markets, we help organisations sharpen their strategy, enhance organisational resilience, motivate their workforce and maximise performance.
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1 Statista. Link: https://www.statista.com/statistics/270384/inflation-rate-in-the-united-kingdom/
2 Claim Metrics data is based on claims between £150 (£500 PI) and £100,000, excluding windscreen claims.
3 Claim Metrics data for 2021 relates to claims settled between 1 January 2021 and 31 December 2021.
According to latest data from Claim Metrics, Willis Towers Watson’s claims benchmarking service, claims inflation increased by 6.1% during first half of 2021.
Following FCA pricing changes, premiums increased by 4% during the first quarter of 2022 and 2% over the last 12 months, with motorists now paying £550.
Motorists now paying £97 less than 12 months ago, which is the second largest fall in prices since the launch of the Willis Towers Watson/Confused.com Index in 2006.
