Motor insurance costs continue to climb in 2025, driven by claims inflation and industry challenges. While some improvements were seen in 2024, factors like expensive repairs, rising personal injury claims, and supply chain disruptions are still pushing premiums higher.
Expensive Repairs and EV Costs
Vehicle repair costs remain a major issue, with labour wages rising and modern technology making even minor repairs costly. A simple bumper replacement can now cost thousands due to embedded sensors and cameras. Electric vehicle (EV) repairs are also significantly more expensive—about 25% higher than traditional cars—and take longer to complete, further increasing insurance costs.
Rising Personal Injury Claims
Compensation for personal injury claims increased by 23% in 2024, while whiplash claims rose by 15%. More cases now exceed the small claims court limit, leading to higher legal expenses. These rising costs make claims more expensive for insurers, ultimately affecting drivers’ premiums.
Supply Chain and Credit Hire Costs
While supply chain issues have improved, unexpected global events still cause price fluctuations. Car part prices rose by 8% in early 2024 due to shipping disruptions. Credit hire costs have also skyrocketed, with courtesy car hire rates now five times higher than in 2014, particularly as more expensive electric courtesy cars enter the market.
The Impact of Inflation
Inflation is also driving up motor insurance premiums, as insurers face higher costs across operations—from claims to administrative expenses. With rising prices for vehicle parts, fuel, and more, insurers are adjusting rates to cover these added costs. As inflation continues in 2025, premiums are expected to rise further, making it crucial for drivers to review their policies and ensure they’re getting the best value.
What’s Next for 2025?
Despite some stability in certain areas, claims costs are expected to remain high. While updates to the personal injury discount rate could help lower expenses for large claims, the overall trend points to continued increases in premiums. Staying informed and reviewing coverage options will be key to managing rising insurance costs. At Insurance 4U, we’re here to help you find the best insurance solutions to suit your needs.
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