The Institute and Faculty of Actuaries’ (IFoA) sixth annual report looking at third party injury (TPI) and third party damage (TPD) motor insurance claims shows the cost per policy of the most severe claims (those with costs above £131,000) has increased on average by 11% per year - due almost entirely to an increase in the average cost of claims rather than a rise in the number of claims.

The IFoA report collated and analysed data from 18 of the top 20 motor insurers for 2014. The report focussed on third party claims which make up 70% of all motor insurance claim costs.

Analysis of initial data received for 2014 suggests that the average cost per policy for large claims in excess of £5m increased by more than 50% in 2014, from £9 to £13 per policy, and this was a key driver of the inflation seen. 

David Brown, one of the authors of the IFoA report said:

“As average cost inflation can be quite volatile on a yearly basis, particularly for large claims, average costs haven’t increased uniformly over the period since 2010.  For instance, albeit based on initial data received at the end of 2014, that year may have seen an increase of 20% alone.  What we found striking was that the amounts being claimed are rising rather than there being an increase in frequency.  For 2014, the average cost per policy for large claims in excess of £5m increased by more than 50%.  Generally, the frequency of claims has remained stable with about 70 claims each year for every million vehicles insured.”

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The full report is available to download here.

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