Claims inflation refers to the rate at which the cost of claims rises for insurers to settle. It is an important factor of insurance as the higher the cost of claims, the higher insurance premiums are.

In the last 12 months we are all aware of the rise in inflation and how this has affected the cost of living. This can be attributed to several factors such as worldwide supply chain issues, rises in energy costs, fuel cost and other political factors. We are going to look at how some of these factors and others are also influencing the rise in claims cost.

Vehicle technology

• Increased sales of electric vehicles– last year, over half a million cars on the road were ultra-low emission
• Cars are becoming more technologically advanced with sophisticated parts that can be expensive to replace and not easily repaired. As a consequence, more cars are being declared a total loss
• A specialised workforce is required to work on these vehicles which is driving up labour costs
• Catalytic converter theft is still an issue due to the desirability of their components

Supply Chain

• A global shortage of microchips has led to delays in new cars being produced and second-hand car prices rising
• The lack of availability of vehicle parts and paint has led to extended repair times. This has impacted hire car duration period
• A shortage of hire vehicles has also led to an increase in hire rates
• The fuel shortage in 2021 pushed up the cost of fuel overall, not just in motor
• Workforce absences due to COVID-19 has impacted supply chains

Brexit

• A well-reported shortage of skilled workers, including HGV drivers. This has led to more temporary HGV drivers being employed who may be unfamiliar with the vehicle and/or routes resulting in a higher number of incidents
• We’ve also seen a significant amount of supply chain disruption, including a shortage of labour and materials, post-Brexit. This has resulted in a higher demand and longer claims lifecycles which has ultimately driven up claims costs

These are just a few of the factors affecting the motor and fleet insurance claims costs. Most of the factors above are difficult for the insured to lessen which means that risk management is more crucial than ever. Speak with your insurance broker for more information on what you can do or visit our previous blog post for some tips of how to save on your fleet cost https://goldstonebg.co.uk/2022/02/managing-the-cost-of-fleet-insurance/.