How the expected 9% claims inflation rise with affect 2020 Motor premiums
The latest vehicle technology, like bumper sensors, front and rear cameras, driver assistance in windscreens and video wing mirrors means that they’re becoming far more expensive to repair than ever before and we see a high level of accidental damage inflation in the claims we are settling. This inflation also applies when an ERS policyholder is involved in an accident with a third-party vehicle.
Interestingly, the ABI said that in the first quarter of 2019, repair costs were the highest since the ABI started collecting this data back in 2013. This trend is expected to continue into 2020 where further increases in damage claims cost of around 9% are expected.
New legislation has been passed in the Civil Liabilities Act, which aims to reduce the cost of whiplash and soft tissue injuries which can be recovered from within two years by providing a fixed tariff of damages. At the same time, the Small Claims court limit will be increased from £1,000 to £5,000 to deter claim farming solicitors. This will reduce the legal costs in claims settlements and most likely reduce the number of claims made. To allow unrepresented individuals to process their own claims, a portal is being developed for claimants to make their claims online. This portal is due to be launched in April 2020.
The delivery of the portal is important because some of the reductions in claims frequency that it’s expected to bring would have offset the increase in damage repairs. We’re keen for the portal to be successfully launched in early 2020 but are concerned that a rushed solution will do more harm than good and that a later delivery is better than one that’s poorly implemented. If the portal is delayed, we expect claims inflation to increase by 7% in 2020. In order to stand still, insurers will need to carry this increase in rate.
If you would like to read the full article from ERS Active Underwriter Martin Hall that explores the challenges facing the motor market in 2020 CLICK HERE
ERS is the UK’s largest specialist motor only insurer underwritten by Lloyd’s and rated A+. For over 70 years, we have worked directly with brokers to provide bespoke cover for their customers’ specialist requirements.
For these customers’ their vehicle is often at the centre of their livelihood or passion, giving rise to different or specific needs that cannot be met with one-size-fits-all insurance. At ERS we recognise and embrace this difference; it is why we employ teams of underwriters who are experts in their field to understand each risk individually to provide the ideal cover and it is also why brokers have told us that they trust us more than any other insurer with a specialist motor risk.
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