Settlement delays likely to worsen UK car insurance claims inflation, WTW has found

Delays in processing motor claims may be hiding the real threat of inflation for insurers, according to global broker WTW in a benchmarking report which concludes that UK inflation is expected to accelerate in 2022.

The inflation rate for car claims settled in 2021 was over 6%, much higher than last year’s overall UK inflation rate of 2.1%, indicating a sharp rise can be expected in 2022 d., the report says. The average cost of a claim rose to £5,349 in 2021.

WTW’s analysis shows that the slowdown in the average time it takes to settle claims due to disruption caused by the pandemic has until recently acted as a temporary brake on claims inflation.

However, 2022 is likely to see a sharp correction in 2022 due to a combination of rising accident rates post-pandemic, rising global inflation, increased used car prices and continued supply chain constraints that drive up repair costs.

Car Claims Inflation – Annual Trends
2019 2020 2021
Average cost per claim (gross) £4,502 £5037 £5349
% change – All engine claims +9.8% +11.9% +6.2%

“The drop in auto insurance claims during the pandemic has been widely reported, but less understood is the bottleneck of personal injury claims, which are taking longer for insurers to process due to issues such as delays in medical reports,” commented Tom Helm, head of claims consultancy at WTW.

“It has inevitably been a challenge for injured people to be seen and treated due to the restrictions of COVID-19 and this has resulted in claim processing times taking longer than at any time in the previous four years. This slowdown in bodily injury settlements means that settlements in 2021 have had a pronounced bias towards lower cost ‘vehicle damage only’ claims, temporarily preventing a sharper spike in claims inflation.’

The average time to settle claims has slowed since April 2020 during the first lockdown. By the last quarter of 2021, the process had taken two months longer compared to the same period in 2019. The time to settle personal injury claims was the hardest hit, increasing by an average of seven months and now taking over two years, for to finish.

Other findings from the latest WTW Claim Metrics benchmarks:

  • London now takes first place from the North West as the region with the highest average cost per claim (ACPC), at £6,189 in 2021.
  • The South West – helped by being the region with the lowest average number of claimants per claim – recorded the lowest ACPC in 2021 at £4,497, around £1,700 below London.
  • The sharpest rise in claims inflation has been seen in the East of England, which has now risen by 23.6% between 2019 and 2021.
  • SUVs have felt the full force of rising used car inflation, with the cost of replacing a stolen large SUV per customer increasing by 28% between 2020 and 2021.
  • The cost to insurers of settling a claim for accidental damage to a customer’s vehicle has increased by 20% between 2019 and 2021.
  • The volume of claims in 2021 varies by region. London figures remain significantly lower than 2019 levels, while the North West saw volumes rise in the second half of last year by 16% in some months compared to the same period in 2019.
  • Rear-end collision claims, historically the most common type of motor vehicle claim, remained in second place in 2021, with “parked stationary collision” retaining the top spot. Hitting a vehicle from behind is almost twice as expensive as hitting a parked stationary car. This will be a trend to watch in post-block claim volumes.

According to WTW’s Helm, whiplash reforms that went into effect just over a year ago may have contributed to the delay in the time it takes to settle injuries. However, there are signs that a lower average price for whiplash claims is starting to materialize, which should help offset some of this year’s increase.

Source: WTW

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