Does a rate rise mean the motor market is fixed?

No. EY expects premiums to rise around 16% over two years, but also expects the sector to stay loss-making in 2026 and only near break-even in 2027. Rate helps. It does not undo the cost already sitting in the claims book.

If claim frequency is stable, why are claims costs rising?

The pressure is severity, not volume. EY points to the average cost per claim, driven by repair, labour, parts and vehicle costs. Fewer or steady claims can still cost more each.

Where should a claims leader focus first in a loss-making market?

The levers inside the current book. Leakage control, supply chain terms, total loss and hire handling, and reserving discipline. These move the result faster than the next pricing cycle.

Could things get worse than EY forecasts?

They could. EY notes that Middle East tension, oil price volatility and supply chain disruption could worsen the combined ratio by a further 5 to 10 percentage points. That is a claims cost risk as much as a macro one.

Why does the M&A surge matter for claims?

Because more books are changing hands in a market where claims quality varies. Reserving, leakage and supply chain terms decide whether a target's numbers hold up. That is a claims question, and it is best answered independently.

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Market Insight

What EY's 2026 Motor Results Mean for the Claims Function

Daniel Athorn · 28 July 2026

A market that is losing money and pulling apart puts more weight on claims, not less.

EY published its latest UK motor insurance analysis on 23 July 2026. The headline is blunt. The sector is expected to stay loss-making this year. For anyone who owns a claims book, the detail matters more than the headline.

In nearly thirty years around claims, I have watched the market swing between hard and soft several times. What follows is my read of the EY figures, from a claims seat rather than a pricing one.

The numbers in plain terms

EY tracks the net combined ratio, or NCR. It is the share of premium a book pays out in claims and costs. Below 100% is a profit. Above 100% is a loss.

The path EY sets out is worth sitting with. The market ran at 98% in 2024, so it made money. It moved to around 102% in 2025, back into loss. EY forecasts 108% for 2026 and 103% for 2027.

Put simply, for every pound of premium earned the sector paid out around £1.02 in 2025. EY expects that to be about £1.08 this year, then around £1.03 next year.

So the market is loss-making now and, on these forecasts, only edges back toward break-even in 2027. That is a long stretch of thin or negative margin.

Rate is recovering, but it is not the cure

Premiums fell around 12% in 2025. EY expects them to rise about 4% this year and about 12% next year, so roughly 16% over two years. Rate is coming back.

Here is the point the headline hides. Rate alone does not fix a loss-making book. It buys time. It does not change the cost of the claims you are already carrying.

EY expects total net claims to rise about 4% this year and about 5% next year. The driver is not more accidents. Claim frequency is broadly stable. The pressure is coming from the average cost per claim. Repairs, labour, parts and vehicle values are all pushing the number up.

That is a claims problem, not a pricing problem. You cannot underwrite your way out of a severity trend once the claim is on the books. You manage it, or you leak on it.

Why the gap between insurers is widening

EY's UK insurance partner makes a point I would underline. The market is becoming more polarised. The gap between stronger and weaker insurers is widening, and consolidation is picking up.

When margins are thin, small differences in claims performance compound. A few points of leakage, a slightly weaker supply chain deal, a slower touch on total losses or credit hire, and the result moves. In a soft, profitable market those gaps hide inside the margin. In a loss-making one they show up on the bottom line.

This is why I keep coming back to the same idea. The claims function is where a motor result is won or lost. Underwriting sets the price of the risk. Claims sets the cost of the promise. In a hard market the second number decides who is on the right side of the line.

The levers that actually move the result

None of this is abstract. There are specific places a claims leader can act, and most of them sit inside the current book rather than the next rate change.

Leakage control. Every file that settles higher than it should is margin gone. Indemnity spend, fraud touchpoints and reserving discipline all belong here.

Supply chain management. Repair networks, parts sourcing, engineering and hire arrangements are where severity is contained or lost. In a parts and labour inflation cycle, the terms and the compliance behind them matter more, not less.

Customer outcomes. Good outcomes and good economics are not opponents. A claim handled well the first time costs less than one reworked three times, and it protects the renewal.

Governance and reporting. If the board cannot see claims performance clearly, it cannot steer it. Clean benchmarking and honest board reporting turn a vague worry into a plan.

What the M&A surge means for buyers

There is a second story in the EY data. UK insurance deal activity is rising. EY counts 40 deals in the first half of 2025 against 55 in the first half of 2026, with disclosed value up from £1.6 billion to £8.4 billion.

More deals in a polarised market means more books changing hands where claims quality varies widely. For an acquirer or investor, the claims function is exactly where value is either real or overstated.

Reserving adequacy, leakage, supply chain terms, and the true cost of customer outcomes are hard to read from a pricing pack. They need a claims eye. This is where independent claims due diligence earns its fee, because it looks at the part of the target that a financial model tends to smooth over.

Frequently asked questions

Does a rate rise mean the motor market is fixed?: No. EY expects premiums to rise around 16% over two years, but also expects the sector to stay loss-making in 2026 and only near break-even in 2027. Rate helps. It does not undo the cost already sitting in the claims book.
If claim frequency is stable, why are claims costs rising?: The pressure is severity, not volume. EY points to the average cost per claim, driven by repair, labour, parts and vehicle costs. Fewer or steady claims can still cost more each.
Where should a claims leader focus first in a loss-making market?: The levers inside the current book. Leakage control, supply chain terms, total loss and hire handling, and reserving discipline. These move the result faster than the next pricing cycle.
Could things get worse than EY forecasts?: They could. EY notes that Middle East tension, oil price volatility and supply chain disruption could worsen the combined ratio by a further 5 to 10 percentage points. That is a claims cost risk as much as a macro one.
Why does the M&A surge matter for claims?: Because more books are changing hands in a market where claims quality varies. Reserving, leakage and supply chain terms decide whether a target's numbers hold up. That is a claims question, and it is best answered independently.

A second opinion that has nothing to sell you

At Jam Risk Solutions we sit on the same side of the table as you. We do not place your business and we sit on no panel. That independence is the point. When the market is this tight, you need a claims view that is not shaped by what someone wants to sell you next.

Our Health Check 360 does exactly what this article argues for. It reviews claims performance, customer outcomes, commercial delivery and strategy, and hands you one written report you can act on. For acquirers, the same discipline runs through our due diligence work.

If the EY numbers have made you look harder at your own book, that is the right instinct. Book a conversation or read more about our services. Advice. Solutions. Results. Jam today, not tomorrow.

Source: EY, UK motor insurance results analysis, 23 July 2026.