UK motor policy inflation accelerates again, distancing claims costs

UK motor insurance policy inflation advanced yet again, with average consumer costs rising another 2.3% in April to render a 38.5% annual policy inflation rate, eclipsing the prior record from after the financial crisis.

Auto claims cost inflation, in sharp contrast, remains muted comparatively with annual inflation readings across the spectrum of cost categories all single digit, albeit chiefly up from the prior month reading.

For the April reading from the UK’s Office for National Statistics, used vehicles pulled out of a deflationary spin on several months of price gains to render a 1.2% annual price increase. Muted spare parts inflation has come down again, now to a 3.6% annual rate.

Maintenance and repair costs rose a heady 2.5% in April to render a 9.6% annual inflation rate, up 3.4 percentage points from the March reading and now at its highest reading in the current dataset.

Marked against pre-pandemic levels at end-2019, insurance premiums have risen 30.6%, versus 35.6% growth in used vehicle prices, but milder 14.9% growth for spare parts and 18.1% for repairs.

Against an even blend of the three cost categories, premium growth from pre-pandemic levels have beaten claims cost growth for four months running, now at a 7.7 percentage point gap.

The UK's Consumer Prices Index (CPI) rose by 8.7% in the 12 months to April 2023, the first single-digit reading since August, down 1.4 percentage points from 10.1% in March.

A separate measure including owner occupiers’ housing costs (CPIH) rose by 7.8% year on year, down from 8.9% in March.

Electricity and gas prices were said to have led to the overall decline in the headline readings.

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