After three consecutive quarters of falling prices, UK motor insurance is set to start climbing in 2026. EY analysis predicts this increase will be about a 3% rise in average premiums, resulting in an increase of £15 per policy.
The reason for this climb is due to repair costs, claim complexity, and inflation. They’re outpacing past-market rates, so an increase is required to protect the bottom lines of insurance companies.
How to Find Quality Deals
For many, the 2026 auto insurance renewal is coming up. With prices set to increase, it’s a good idea to find the best quality deals for you and your household.
In the past, when motor insurance premiums have publicly increased, like they are now, insurers would post special deals – these are the ones you want to keep an eye out for.
Think about the Betfair casino welcome bonus, for example. They offer new clients 50 free spins if they deposit just £10, getting people onto the platform by offering a ‘free’ promotion with a deposit. Motor insurers will do something similar; they’ll look to hook new customers in for limited-time deals and retain them with their services.
You’ll likely find them everywhere as well. Admiral, Aviva, Direct Line, and LV= will run new-customer perks ranging from cashback offers, loyalty rewards, multi-vehicle discounts, and free first-month extensions.
Using comparison websites is always a good idea when searching for new motor insurance also. These companies do get a commission for using their platforms, but rarely at the expense of the customer. Instead, the insurer pays for it.
Still, they organise all the necessary information together in one, easily digestible format, which is massively beneficial when seeking and comparing these new deals.
What the Increase Means for Motorists
A 3% rise does sound rather modest. However, it comes at a time when claims costs are climbing far faster.
Of the £2.9 billion insurers paid out in claims in Q1 2026, £1.9 billion went on vehicle repairs alone, up 3% on Q4 2025. The average accidental damage claim is also £3,699, which is an 8% jump on the previous quarter.
The reason for these increases is that modern vehicles are highly complex. EVs, hybrids, advanced driver-assistance systems, etc., cost a lot to build and, unfortunately, to repair.
Unless innovations are made to lower these costs, premiums will continue to increase in the future.
How 2027 May Look
The outlook on 2027 motor insurance really comes down to whether or not inflation begins to ease.
EY’s current forecast says that the UK motor sector will move from 101% net combined ratio in 2025 to 111% in 2026. This means that insurers will pay £1.11 in claims for every £1 collected in premiums.
For insurers to remain profitable, they’ll need to flatten costs or raise premiums. Which one they’ll do will highly depend on the economy going into 2027. However, if we had to look at both options, it seems like rising premiums will be the more likely option.
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