Motor Premiums on the Rise, Says Defaqto

Motor insurance premiums increased by +2.1% in Q2 2026, confirming that the market has moved back into a period of price growth following two years of sustained reductions, according to the latest Defaqto Market Pricing Motor Insurance Price Index.

The increase means competitive motor insurance prices have now risen by +3.6% since the start of the year, with Q2 building on the +1.4% increase recorded in Q1.

The latest data shows the sharpest monthly rise came in April, when the average of the top five quoted premiums increased by +1.8%. This was followed by a smaller rise of +0.6% in May and a slight decline of -0.2% in June, suggesting that while the market has hardened, the pace of increases may be beginning to moderate.

The shift is significant because it continues the reversal of the pricing cycle seen throughout 2024 and 2025, when motor premiums fell consistently as competition intensified and prices normalised after the claims inflation-driven increases of the previous cycle.

Quoted motor premiums are now just -0.8% lower than they were a year ago. At the end of 2025, the equivalent year-on-year figure was -11.4%, showing how quickly the gap has narrowed as prices have moved back into positive territory during the first half of 2026.

However, the longer-term picture remains more balanced. Competitive motor prices are still -17.1% lower than they were two years ago, although this gap has been narrowed by the quarterly increases seen so far this year. Compared with pre-Covid levels, current pricing is now +11.4% higher.

“Q2 confirms that the motor insurance market has moved into a harder pricing phase, but this is not a repeat of the extreme inflationary cycle we saw in 2022 and 2023. Prices have risen for two consecutive quarters, and the year-on-year gap has narrowed very quickly, but the June movement suggests the market may now be finding a more stable footing.

“What is important is the direction of travel. That indicates that the sustained reductions of the last two years have come to an end. Insurers are again applying upward pressure where they need to, particularly as they seek to protect margin and respond to underlying cost dynamics.

“However, the market remains competitive. The latest data points to a more disciplined environment rather than a broad-based surge in premiums. Pricing is becoming more targeted, more segmented and more closely aligned to individual provider strategies.”

The Defaqto data also highlights significant divergence between major providers. In Q2, price movements across large motor insurers ranged from reductions of -2.7% to increases of +11.9%. Several major providers recorded increases above 3%, underlining the extent to which pricing strategies are no longer moving uniformly across the market.

The 12-month provider trends show a similarly varied picture. Year-on-year movements ranged between -4% and +13%.

Defaqto’s analysis also shows that premium movements are not being applied evenly across customer groups. By driver age, data shows a spread in 12-month indexed movements, with some age bands remaining below last year’s level while others have moved above it. The data also indicates that, by annual mileage, prices have risen most for the lowest mileage drivers, while levelling off or dropping for those using their vehicles more.

“The headline increase in motor premiums is only part of the story. Beneath the average, we are seeing a much more complex pricing environment, with provider movements varying significantly and customer segments being treated differently.

“The annual mileage data is particularly interesting. Prices have risen most for lower mileage drivers, while premiums for higher mileage drivers have levelled off or fallen. That suggests insurers are continuing to refine their view of risk and are making more granular pricing decisions rather than simply applying market-wide increases.

“For consumers, this means shopping around will remain important. As prices rise, retention may become more difficult for insurers because customers will be more alert to increases at renewal. For insurers and brokers, the key challenge will be explaining price changes clearly while continuing to demonstrate value in a market where competitive pressure remains intense.”

Defaqto said the outlook for motor is now more stable than during the previous pricing cycle. While the market has hardened, the data suggests future increases are unlikely to be as extreme as those seen during the last period of rapid motor premium inflation.

“The market has changed direction, but the evidence points to a controlled correction. Insurers have improved margin and may benefit from increased quote demand as customers respond to price rises, but they will also need to manage retention carefully.

“The remainder of 2026 is likely to be defined by targeted pricing, sharper segmentation and continued competition for the risks insurers most want to write. Motor premiums are rising again, but the market appears to be moving into a more stable and disciplined phase.”