Claims inflation is a significant feature at the moment, whether in Motor, Casualty or Property, there is a concatenation of events which means that the pressure is unlikely to decrease at any time soon.
We have looked at the factors in a little more depth and what is being done to address them:
Casualty
Casualty claims have experienced an above-average inflationary increase for a number of reasons.
Higher value injury claims are made more expensive by rising care costs, prosthetics and other medical aids, and more injury claims are moving to a higher track, e.g., from the Fast Track to the Intermediate Track.
In April 2024, the Judicial College published the 17th edition of their guidelines, which included increased figures of around 22% across the board in light of inflationary pressures since the publication of the 16th edition. This was based on the Retail Price Index, and so 6% higher than it would have been had they used the Consumer Prices Index (CPI). This, too, has led to a number of lower-value claims exiting the small claims track because of the track's £10,000 upper limit and incurring legal costs.
Loss of earnings claims have increased substantially because of heightened wage inflation over the last few years. Wage inflation has outpaced CPI inflation every month since July 2023. From July 2023 to September 2025, CPI rose 6.4% whilst total pay rose 10.2%.[1]
Care costs are now increasing at a faster rate than they have in the recent past. In 2023/4, care costs for 18-64 year olds increased 3.8% over 2022/3 costs, and costs for 65+ year olds increased 6.5%. For 2025/6, LaingBuisson expects that costs will increase 7% for nursing care and 8% for residential care.
Because commercial rates for care are rising, costs are also rising for gratuitous care, which are calculated by applying a reduction to commercial rates of 25%.
The main driver of inflation in care costs remains labour, with the increase in employers’ National Insurance (NI) Contributions and the increase in the National Living Wage being the main driving factors. The Nuffield Trust estimated that the changes to employers’ NI contributions will cost adult social care providers over £900 million.[2]
The costs related to experts' reports and medical records have also increased. Claimants are now asking for £38 plus VAT for records for non-RTA claims, an increase of £10 per set of records. These costs will add up across insurers' portfolios.
Casualty claims have also seen an increase in value because of an uptick in inflated and exaggerated claims values. For example, it appears that the number of claims for traumatic brain injury (with attendant case management and rehab costs) is on the rise, even where ultimately there is found to be no or only minor initial head injury.
There are also reports of an increase in the number of fraudulent and fundamental dishonesty claims across the sector, made worse by the use of artificial intelligence to produce more convincing fake evidence.
As with motor claims, despite a drop in casualty claims volumes, we see claims costs continuing to climb, and the forecast points to the problem remaining for the foreseeable future. There are a number of steps that can be taken to remedy this.
Political level: the FCA's Motor Insurance Claims Analysis report[3], published this July, proposed that the government look to contain increasing long-term care costs, making it clear that the regulators acknowledge that something needs to be done to remedy the situation.
Though the Motor Insurance Taskforce is motor-centred, we expect that some of the recommendations in the report likely will be applicable to casualty claims. We will keep clients informed.
Additionally, the current atmosphere of desiring to reduce the number of low-earning immigrants is making it more difficult to employ an adequate number of carers, driving labour costs up. The market needs to consider the best course of action to counter this trend.
Regulatory level: the FCA has published its roadmap for retail insurance, setting out its recommendations for the Motor Insurance Taskforce to consider to address the various issues in its claims analysis, including areas that are equally relevant for casualty claims:
- Cost of bodily injury claims – how best to contain increasing long-term care costs; how best to monitor and manage bodily injury claims trends and the need for further interventions (e.g. further tariffs); engaging with SRA and GMC to consider increasing penalties for those engaging or assisting in claims fabrications; and
- Fraud – consider the potential deterrent effect of higher penalties; how best to bring stakeholders together to detect fraud.
Industry level: there are a number of actions insurers could and should take, e.g.:
- Continue to lobby for an increase in the small claims limit to bring it in line with inflation. CPI has increased 42% since the limit was last raised, meaning a claim that is worth £14,000 should be in the small claims track. This would increase the number of claims that do not incur legal costs.
- Remain vigilant in the fight against fraud. Put in place means of combatting the growing use of AI, and train staff to be better at spotting AI-produced evidence.
Challenge inflated claims and costs, including for smaller amounts, such as with medical records, that will add up over time.
Motor
Claims inflation has been a significant feature in motor claims for several years now, and it appears that it is an issue that will remain high on the agenda for some time to come.
In the period 2019 to 2023, claims inflation was tracking at 34% as against CPI of 21% for the same period.[4] What this has equated to are increases in:
- Accidental damage: 52% (£1.6B > £2.4B)
- Property damage: 44% (£1.5B > £2.1B)
- Replacement vehicle: 48% (£473M > £699M)
- Theft: 79% (£298M > £533M)
In that same period, claims volumes have been coming down, and from its post-COVID high in Q4 2022, there was a reduction of 23% to Q1 2025.
Despite that reduction in volume, in that same quarter (Q1 2025) insurers paid out a record-breaking £3.2 billion, a sum nearly equalled in Q2, where insurers paid out £3.1 billion.
In its roadmap for retail insurance, the FCA notes a 41% reduction in bodily injury claims volumes, but a 7% increase in total bodily injury claims costs – driven by the increased cost of claims.
It appears likely that claims volumes will continue to fall. We see a number of reasons:
- Improvements to vehicle technology
- Increased use of 20mph limits in urban zones
- Changes to driving patterns as a result of lockdown, which have not reverted to pre-COVID norms
- Technology and the dissemination of information by stakeholders to vehicle owners, leading to fewer thefts
On the same token, it appears likely that claims costs will continue to rise. The most obvious driving factors behind that are:
- Increased cost of living pressures drive up fraud, fundamental dishonesty and exaggerated claims
- Vehicle technology – ADAS components and added labour can increase costs by up to 40%[5]
- Battery electric vehicles (BEVs) are, at present, 20-40% more expensive than equivalent ICE models, and BEV repairs cost 35% more[6]
- There are also knock-on effects for replacement vehicle claims
- Labour shortages in the repair and care sectors
- Rising costs of care, prosthetics and other medical aids
- No increase in small claims limit since 2014
So, despite all of the successes leading to a reduction in claims volumes the picture is still one of difficult times ahead. So what is being done about it?
Political level: the cost of insurance premium, its underlying causes and its impact on the most vulnerable in society were held out as a significant issue by the then incoming Labour government. This led to the launch of the Insurance Taskforce in October 2024. The report from the Taskforce is expected imminently, and we will be providing our thoughts on that once the report is available.
Regulatory level: The FCA has published its roadmap for retail insurance, setting out its recommendations for the Taskforce to consider to address the various issues in its motor claims analysis, including:
Repairing vehicles: to consider actions to boost the supply of skilled labour to reduce delays and labour costs, and how the motor manufacturing industry could act to reduce lead times and supply chain pressures.
Cost of replacement vehicles: engage with stakeholders to improve the functioning of this market.
Cost of bodily injury claims: how best to contain increasing long-term care costs; how best to monitor and manage bodily injury claims trends and the need for further interventions (e.g. further tariffs); engaging with SRA and GMC to consider increasing penalties for those engaging or assisting in claims fabrications; control of micro-mobility devices (e.g. e-scooters)
Cost of theft: engaging with the motor manufacturing industry on ways to better protect vehicles from theft; looking at interventions to ensure technology used to steal vehicles cannot be sold; measures to reduce the number of stolen vehicles shipped overseas; and whether increased penalties for those involved in theft would be a stronger deterrent.
Fraud: consider the potential deterrent effect of higher penalties; how best to bring stakeholders together to detect fraud.
Uninsured drivers: increasing checks to identify uninsured vehicles; harsher penalties for uninsured driving.
Industry level: In its motor analysis the FCA has also set out various steps that the ABI and its members could take, including developing a good practice code around outsourcing of claims services; has said it will work with the ABI on how claims can be better managed to ensure greater efficiency without impacting the customer journey; and to consider what additional actions that the industry can take to improve fraud detection and prevention.
The ABI had of course in advance of the Taskforce and FCA report set out its 10 point plan to tackle motor insurance costs which covers: 1) helping consumers to make informed decisions; 2) combatting vehicle theft; 3) tackling fraud and uninsured driving; 4) improving road safety and road infrastructure; 5) supporting new and novice drivers; 6) reducing the impact of the personal injury discount rate; 7) continuing whiplash reform; 8) advocating for safety-focussed vehicle technology; 9) lowering IPT; and 10) supporting the repair sector. They continue working on the issues identified in their plan.
Individual insurer level: the key areas for driving efficiencies for individual insurers will include a focus on capturing more claims at an earlier stage and applying intervention strategies. Strategies around the use of green and aftermarket parts to help with cost and supply chain delays are also key. We are also seeing some insurers working with networks to ensure there are sufficient and adequately qualified workers for ADAS and BEV.
Much is being done at all levels to control cost inflation. We eagerly await the Taskforce report to see whether the proposals will support the industry in addressing claims inflation.
Property
UK property claims are being shaped by a convergence of pressures, from rising construction and materials costs to more frequent and severe weather events. These inflationary forces are amplified by supply-chain bottlenecks, labour shortages and longer repair cycles that push up reinstatement costs and delay in repairing the property. Together, they create a claims environment where losses are larger, more complex and increasingly difficult to subrogate efficiently.
Inflation remains near 4% in 2025 (at 3.8% in October 2025), and the chancellor's budget implements few remedies to the concerns surrounding underinsurance. What are the consequences of these factors on the sector, and how will insurers respond?
Market conditions remain challenging despite signs of gradual improvement. ABI premium-tracker data shows that the average combined buildings and contents premium for Q3 was £15 less compared to the same period in 2024 and £7 lower than the previous quarter. Although the pace of premium inflation has eased markedly since its 2023 peak. These pricing pressures do not reflect the wider strain on insurers’ balance sheets.
Beneath headline figures, structural and market pressures continue to feed into claim values. Recent data from the ONS shows that deliveries of core building materials have weakened in 2025, with some categories registering their lowest sales of deliveries since 2020. Saliently, concrete block deliveries in Great Britain fell 3.5% month-on-month, leaving production levels 23.1% lower than in 2019. This disconnect between uncertain demand volumes and potentially constrained supply capacity creates a significant risk. If demand rebounds through the forecasted £725 billion government infrastructure strategy, competition for scarce resources could lead to sudden price spikes, supply delays and project uncertainty. This, in turn, would fuel inflationary pressure on rebuild and repair costs.
Taken together, this data shows that elevated claim costs have become a persistent feature of the market rather than a spike. The most obvious driving factors behind these inflationary pressures are:
- Supply disruption, in part due to a reduction in available skilled workers, is compounded by recent changes in British immigration policy.
- Persistently high weather-related losses, including increasing payouts for flood and storm damage.
- Energy and material costs inflation driven by global supply chain commodity pressures, global tariffs, sanctions and energy insecurity.
- Regulatory constraints in relation to listed-building requirements, conservation area controls, and party-wall obligations are slowing down the claims lifecycle. Letting agent reports hold the Renters' Rights Act 2025 responsible for the decrease in available alternative accommodation.
- The economic downturn, combined with rising interest rates and National Insurance contributions, has caused an increase in costs for householders/commercial enterprises, which extends to an increase in bills.
Understanding these drivers is only one side of the challenge; the next is assessing how the market is responding to them. With pre-Brexit operating conditions unlikely to return in the foreseeable future, a range of political, regulatory, industry and insurer-led measures are emerging to help manage these pressures and stabilise the property claims environment.
Politically, the focus has shifted from direct price intervention towards resilience and risk mitigation, which are increasingly seen as central to controlling long-term property claims inflation. Measures include investment in flood defences, improved planning regulations, property-level resilience standards, and initiatives such as Flood Re (which is set to end in 2039), which help stabilise premiums while encouraging risk reduction. Additionally, smart building features such as leak detectors, smart thermostats, and automated monitoring systems help identify issues early, prevent incidents like water damage, frozen pipes and equipment failures; in the hope of preventing, or at least shortening the lifespan of property claims. However, smart building features and "build back better" all come at a cost to insurers. With no guarantee of customer loyalty, there needs to be complete market agreement for the mutual benefit of reducing risks long term. This is a real conundrum when considered against the basic insurance indemnity principle of only paying for the financial loss and no profit being made from the claim.
On the regulatory side, pressures are directed at strengthening governance, claims triage, documentation and recovery processes to ensure robust and transparent handling of claims. The FCA’s ongoing work on general insurance pricing and claims outcomes emphasises that customers must receive fair value, while also ensuring that insurers maintain adequate oversight and consistency in claims management.
Industry responses are investing heavily in digital claims pathways, data-driven triage and supply-chain platforms. The hope is that they enable faster repair initiation and clearer responsibility mapping, critical to preserving subrogation opportunities before evidence deteriorates and costs escalate.
For insurers, these pressures demand not only operational agility but also more proactive strategies to control claims costs, including:
- Streamlining the claims process by adopting mechanisms to avoid any delays to the tender process, whilst encouraging early notification from brokers and customers. This needs to cover both first and third-party claims.
- Monitoring reinsurance in line with inflation.
- Salvage optimisation to reduce the life cycle of claims.
- Transparent and proactive communication with customers through their preferred method of communication.
- Avoiding under-insurance through enlisting professional valuations that proactively monitor inflation and customer guidance on renewal/taking out a policy to ensure accurate valuations.
Despite ongoing inflationary pressures, the property-claims market remains fundamentally resilient, supported by strong insurer capacity, mechanisms to improve supply-chain stability and a proven ability to adapt to evolving cost and regulatory challenges.
Our Strategic Advisory team is here to assist you in navigating these increasingly choppy waters. We work closely with our technical teams, ensuring that our solutions-focused approach works for the benefit of our clients.
Should you wish to discuss any of the issues raised in these papers further, please contact any of us in Strategic Advisory.
[1] https://www.fca.org.uk/publication/multi-firm-reviews/motor-insurance-claims-analysis-multi-firm-review-2025.pdf
[2] https://www.aftermarketmatters.com/national-news/adas-technology-escalate-repair-costs/
[3] https://www.fleeteurope.com/en/new-energies/europe/features/evs-crash-less-frequently-cost-more-repair?a=JMA06&t%5B0%5D=Electrification&t%5B1%5D=EVs&t%5B2%5D=Insurance&t%5B3%5D=Safety&curl=1
[4] Calculations based on CPI (https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/d7bt/mm23) and AWE (https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/averageweeklyearningsingreatbritain/november2025) data
[5] https://www.nuffieldtrust.org.uk/news-item/social-care-providers-at-risk-of-collapse-as-analysis-reveals-cost-to-sector-of-employer-national-insurance-hike
[6] https://www.fca.org.uk/publication/multi-firm-reviews/motor-insurance-claims-analysis-multi-firm-review-2025.pdf
