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.

ERS Opinion

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


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