UK motor policy inflation hits consecutive record, distances claims costs

UK motor insurance policy inflation surged to yet new all-time record of 40.6% on a 3.4% increase just during the month of May, well outpacing the trend in key claims costs yet again.

Auto claims cost inflation looks comparatively muted, all with mid- to upper-single digit annual readings, data from the UK’s Office for National Statistics showed.

Maintenance and repair costs rose 0.7% in May, but still allowed the annual inflation reading to ease 0.8 points to 8.4%, still the upper end of the 12M range.

Spare parts and accessories rose 0.2% in price in May to render a 4.9% annual inflation reading, a rise from April, but still within the 12M range.

Used car prices have been the wildcard element throughout and remain volatile: May's 0.9% monthly increase rendered a 2.8 point rise in the annual reading, the second month of annual gains after a deflationary swing.

Marked against pre-pandemic levels at end-2019, insurance premiums have risen 35.0%, versus 36.8% growth in used vehicle prices, but milder 15.1% growth for spare parts and 18.9% for repairs.

Against an even blend of the three cost categories, premium growth from pre-pandemic levels has beaten claims cost growth for five months running, now by 12.2 percentage points.

The UK's broader Consumer Prices Index (CPI) rose by 8.7% in the 12 months to May 2023, a match to the prior month reading and only the second single-digit reading since August.

A separate measure including owner occupiers’ housing costs (CPIH) inched up a notch in May to a 7.9% reading.

Rising prices for air travel, recreational and cultural goods and services, plus the big bump in used vehicles were said to have exerted the most upward pressure, offsetting falling prices for motor fuel.

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