WTW predicts ‘sharp’ increase in motor claims inflation

UK motor claims inflation is expected to accelerate in 2022, insurance advisory firm WTW has warned.

WTW (previously known as Willis Towers Watson) has conducted analysis that 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 more than 6% during 2021, taking the average cost per claim to £5,349, according to WTW’s latest Claim Metrics benchmarking data.

But 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” this year.

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.”

“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, WTW found, increasing by seven months on average and now taking over two years to complete.

Image: Canva

Mark Dugdale