UK Motor Insurers Paid Out a Record £3.2bn — and a Third of Drivers Still Fear Claiming

A Record Payout Quarter, and an Industry's Trust Problem

UK motor insurers paid out £3.2 billion to customers in the second quarter of 2026 — the largest quarterly total on record, according to the Association of British Insurers' Motor Insurance Premium Tracker. Payouts rose 5% from the previous quarter and 7% year on year, while the average claim settled at £4,900, up 4% quarter on quarter. Premiums moved far less: the average policy cost £566, an increase of just £6 over the quarter, and £14 less in real terms than a year earlier.

The affordability narrative is harder to reconcile with how customers behave. Research from credit bureau CRIF found that 35% of UK motor policyholders are now afraid to make a claim in case their premium rises, up from 33% a year ago. That puts Britain above the European average of 31%, behind only Ireland on 41%, and far ahead of Italy, where just 18% of policyholders say the same. Motor cover remains the UK's most widely held insurance, owned by 59% of adults.

The two data points matter together. Insurers stress they are absorbing higher costs, but EY projects motor insurers will pay out £1.11 in claims and expenses for every £1 of premium collected this year, after £1.01 in 2025 and 97p in 2024. With repair costs rising — accidental damage claims averaged £3,699 in the first quarter, up 8%, and repairs accounted for 64% of total motor claims by Q3 2025 — the gap between record payouts and widespread claim avoidance is likely to shape both pricing and product design in the months ahead.

How Repair Costs and Claim Aversion Are Squeezing UK Motor Insurance

Repair Inflation Is the Real Engine

The most concrete driver in the data is the cost of fixing modern cars. Windscreen repairs averaged £283 in Q2 2026, up 7%, because sensors, cameras and driver-assistance systems are built into the glass. Accidental damage claims rose 8% to £3,699 in Q1 2026, and repair bills accounted for 64% of total motor claim spending by Q3 2025. That explains why the average payout climbed 4% to £4,900 even while premiums barely moved. The ABI's call for government action on repair-sector skills and parts availability is a direct response to these cost pressures.

A Claim-Aversion Paradox

CRIF's finding — 35% of policyholders avoid claiming for fear of higher premiums — creates a genuine market distortion. If drivers suppress legitimate claims, insurers pay out less in the short term and can keep headline premium increases smaller, but they also lose the claims data needed to price risk accurately. Meanwhile Broadstone's analysis of FCA survey data shows more than one in seven motorists have reduced their cover in the past two years, rising to a quarter among people with heavy credit burdens. That points to underinsurance becoming an embedded affordability response rather than a temporary one.

What the Loss Ratio Points To

EY's forecast of £1.11 of claims and expenses per £1 of premium implies the current quiet premium picture cannot last without further cost relief. Verified figures show insurers are already paying more than they collect; the realistic short-term consequence is a return to premium increases, which would likely deepen the claim-avoidance behaviour. The more constructive signal is CRIF's finding that a quarter of drivers would share more data in exchange for cheaper premiums. That suggests the industry's escape route runs through usage-based and data-driven pricing rather than reassurance campaigns.

What Drivers, Insurers and Regulators Should Watch

For drivers:

• Before claiming for minor damage, compare the repair cost — e.g. the £283 average windscreen claim — against the risk of a premium increase. With an average annual premium of £566, self-funding a small repair can sometimes protect future pricing, though it depends on individual policy terms.
• If you have cut cover to save money, remember Broadstone's finding that more than one in seven motorists have done so recently; reduced cover leaves you exposed to the very claim costs the market is warning about. Get quotes for different levels of cover rather than dropping protection.

For insurers:

• Treat EY's £1.11 claims-and-expenses ratio per £1 of premium as a signal that repricing is likely; repair-cost inflation of 8% on accidental damage claims needs supply-side answers on parts and skilled labour, not just higher premiums.
• Act on the data-sharing signal: a quarter of drivers say they would share more data for cheaper premiums, giving usage-based products a clear opening to win customers who now fear claiming.