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Press Release

UK motor claims inflation on the rise with added pressure from delayed injury settlements

Insurance Consulting and Technology
Insurer Solutions|

July 14, 2022

WTW data shows inflation rate for motor claims settled in 2021 was over 6%, far higher than last year’s UK general inflation rate of 2.1%1, indicating a sharp rise to be expected in 2022.

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.

Motor Claims Inflation

YOY Trends
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:

  • London now takes the top spot from the North West as the region with the highest average cost per claim (ACPC), at £6,189 in 2021.
  • The South West - helped by being the region with the lowest average claimants per claim – records the lowest ACPC in 2021 at £4,497 some £1,700 below London.
  • The sharpest rise in claims inflation took place in the East of England, which has now risen by 23.6% between 2019 and 2021.
  • SUVs felt the full force of soaring second-hand car inflation, with the cost of replacing a customer’s stolen large SUV increasing by 28% between 2020 and 2021.
  • The cost to insurers to settle a customer’s vehicle accidental damage claim has increased by 20% between 2019 and 2021.
  • Claim volumes in 2021 varied between regions. London figures remained considerably down compared to 2019 levels, whereas the North West saw volumes during the second half of last year increase by 16% in some months compared to the same period in 2019.
  • ‘Hit in rear’ claims, historically the most common motor claim type, remained down in second place in 2021, with ‘hitting a parked stationary car’ retaining the top spot. Hitting a vehicle in the rear is almost twice the cost of hitting a parked stationary car. This will be a trend to monitor in post-lockdown claim volumes.

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.”

About Claim Metrics

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.

About Insurance Consulting and Technology

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.

About WTW

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.

Working shoulder to shoulder with our clients, we uncover opportunities for sustainable success—and provide perspective that moves you.

Footnotes

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.

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