Motor insurance costs are expected to climb by around 3% in 2026, according to new analysis from EY, as rising repair and claims costs begin to outweigh recent price reductions. The increase would add roughly £15 per vehicle to annual premiums.
This follows an expected 10% drop in premiums during 2025, which would save motorists an average of £54 per policy. However, EY warns this period of relief may be short-lived.
The firm expects insurers to roughly break even in 2025 before slipping back into losses in 2026. By then, insurers are forecast to be paying out £1.11 in claims and operating costs for every £1 they collect in premiums. By comparison, in 2024 the sector made a modest profit, paying out just 97p for every £1 earned.
EY says the pressure is being driven by more expensive vehicle repairs, increasingly complex technology in modern cars, and insurers cutting prices to remain competitive.
Dan Beard, EY UK insurance partner, said: “While lower premiums in 2025 will be welcome news for motorists, reduced income growth will negatively impact insurers’ balance sheets.”
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