Press release
16 Dec 2024 

UK motor insurers to report profitable 2024, but enter the red again in 2025

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  • A profitable NCR* of 93% is forecast for UK motor insurers this year – the highest level of profitability since 2020 – as inflation and claims costs fall
  • However, the sector is expected to record a loss-making NCR of 101.6% in 2025, as premium income grows slower than claims inflation
  • Consumer premiums expected to rise 12% in 2024 (£68 per policy on average), but fall by -2% in 2025 (£7 savings per policy)

The UK motor insurance market is expected to return to profitability in 2024, following two years of losses, according to EY’s latest UK Motor Insurance Results. A Net Combined Ratio (NCR) of 93% is forecast for 2024, following 2023’s loss-making NCR of 112.7% – the worst year on record for motor insurers.

High claims, material, and labour costs, alongside premium rates sitting below claims inflation levels, meant 2022 and 2023 were particularly difficult years for UK motor insurers. However, falling inflation, continued improvements in claims frequency, and premium increases in the second half of 2023 boosted the sector’s performance this year, with EY estimating that UK motor insurers paid out 93p in claims and expenses for every £1 in consumer premiums (compared to £1.13 paid out for every £1 in 2023). As a result, EY expects motor insurers to return to profitability in 2024, with a forecasted 93% NCR – the highest level of profitability since 2020. 

Consumer premiums are expected to rise 12% in 2024 (£68 per policy) but fall in 2025

Consumer premiums increased by 25% in 2023 as firms brought rates in line with inflationary pressures. This correction has continued to drive up premium rates into 2024 – though at a slower pace as cost and inflationary pressures eased. As result, EY expects a 12% increase in consumer premiums this year, adding £68 per policy on average.

Premiums are then forecast to fall slightly by -2% in 2025 (versus the average 2024 level) as market competition keeps rates down, which will mean customer policies will lower by an average £7.

UK’s motor insurance sector expected to be back in the red in 2025

Despite easing costs and claims frequency, premium income growth slowed in the first six months of 2024 and premium rate reductions are expected in the second half of the year. This is likely to weigh on 2025’s earnings, and as a result, EY expects a loss-making NCR of 101.6% for UK motor insures in 2025.

Mat Wheatley, UK Insurance Partner at EY, comments: “2022 and 2023 were challenging years for motor insurers, who had to contend with significant losses, and for consumers, who faced sharp premium increases. But this year, falling inflation, easing claims costs and stabilising balance sheets mean the sector is expected to return to profitability in the short-term, and customers should see lower premiums in 2025.

“Overall, uncertainty around the geopolitical environment, heightened regulatory scrutiny, and the impact of the 2025 Ogden discount rate change are the biggest challenges for motor insurers. This means 2025 will again be a balancing act for firms, as they continue to support customers, carefully manage costs, keep pace with regulatory change and pursue sustainability and tech transformation.” 

Notes to editors:

*NCR is calculated by ratio of claims paid out divided by premiums received, excluding investment returns and/or any other income streams.

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