Claims costs under the spotlight
4th April 2023Tweet
A specialist seminar hosted by ILC, in association with investment bank Keefe, Bruyette & Woods, examined the influences and current health of the motor insurance claims sector in the UK.
During a number of open panel discussions, the internationally broadcast session addressed issues including repair costs, whiplash reforms, parts supply, electric vehicles, the OIC portal, and the cost-of-living crisis.
Interestingly, it was suggested that the challenge around spare parts is not the main driver behind claims inflation. Instead, rising claims costs were attributed to a 15% increase in labour costs, a 40% rise in the credit hire rate, plus a 15% increase in paint and materials prices.
That said, it was agreed that parts supply is having an impact on costs, with supply times quadrupling from two or three days to eight or nine. As a consequence, key-to-key times have been pushed from 10 days to 13.
Looking ahead, it was predicted that repair cost inflation will this year dip from the 12-13% experienced in 2022 to around 10%.
Meanwhile, in terms of whiplash reforms it was claimed that it is still too soon to tell if they will ultimately succeed in driving down premiums for policyholders. Until more data is available the true impact of the reforms will not be known.
However, an increase in the amount of mixed injury whiplash claims from 37% pre-reforms to 70% now suggests there are changes to the way claims are being presented.
But for insurers, the launch of the OIC portal led to savings of £500 in every £5,000 motor claim in legal fees alone, although that should not be the only measure of success, with ineffective technology suggesting that automating claims through the portal remains a challenge and a substantial backlog is coming down the road.
Elsewhere, the rapid uptake of electric vehicles is too impacting claims costs. Repair times are 14% longer for EVs than traditional petrol or diesel vehicles, with repair costs up to 25% higher. It was also suggested that some vehicles coming to market might simply be impossible to repair, resulting in total losses for even a small claim.
The panel also warned that the continued cost-of-living crisis could have a growing impact on claims costs due to a growing propensity to exaggerate claims.
Please contact firstname.lastname@example.org for a copy of the official event report produced by KBW.Tweet
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