Claims stayed at a record £3.2bn as the average premium slipped to £562

The average motor insurance premium fell £4 to £562 in the third quarter, while insurers paid out £3.2bn in claims, matching the record set three months earlier. The two figures sit awkwardly together. The price of cover has stopped rising, the cost of the claims behind it has not, and one insurer carrying the difference has begun saying so in public.

The £562 average and the £3.2bn bill

The ABI's Motor Insurance Premium Tracker, which analyses more than 28 million policies a year, puts the average premium paid between July and September at £562 (ABI, 9 November). That is £4 below the second quarter's £566 (ABI, 29 July) and £11, or 2%, above the same period last year. Adjusted for inflation the average is £7 lower than it was a year earlier.

Claims moved the other way. Insurers paid £3.2bn to policyholders in the quarter, the same as the record set in April to June and 8% more than a year earlier. The average claim came to £4,900, up 1% year on year.

Set the two averages side by side and the arithmetic is stark. One average claim costs 8.7 times the annual premium. That ratio is not a loss ratio, because most drivers never claim and the premium average includes every policy the ABI tracks. It does show how much of the pricing rests on a small number of expensive events.

Why the average is not the quote

An average premium is a record of what drivers paid, and most of those policies were priced months before they started. A renewal notice going out now is priced against the next year of claims rather than the last one, which is why the market average can fall while the price of new cover is already turning.

Sabre, the motor insurer listed in London, said as much in its third-quarter trading update. Claims inflation has run at 6% to 7% through 2026, it reported, and market-wide premiums have not kept pace with it (Sabre, 20 October). Its own motor premium rose 16.5% to £155.1m in the nine months to September. The company says its pricing covers the claims inflation that the wider market has yet to pass on.

Geoff Carter, Sabre's chief executive, put the position plainly in the same update. "Claims inflation continues to run slightly ahead of historical norms at 6% to 7%, but we do not see market premiums year to date keeping pace with this level of cost increase," he said. The company told shareholders that "material market-wide price increases are likely to be required to cover claims inflation", while warning that the timing remains uncertain.

That is an insurer talking about its own input costs rather than a forecast for any individual renewal. It is still a clear statement that the period of falling and flat premiums has an end date.

Where the claims money goes

Part of the answer is the cost of putting a damaged car right. The FCA's multi-firm review of motor claims found that the average repair bill for a petrol or diesel car rose from £2,350 in 2019 to £3,344 in 2023, an increase of 42% (FCA, July 2025). Electric cars went from £2,908 to £4,197, and hybrids from £2,393 to £4,012. The same review put the average labour rate at £45 an hour, up 28% over the period, with repair hours up 10%.

The total cost of vehicle theft claims across the 12 firms in the review rose 79% between 2019 and 2023, from £298m to £533m.

Small claims carry the same trend in miniature. The ABI puts the average windscreen claim at £298 in the third quarter, 5% higher than the previous quarter and 9% higher than a year earlier. A windscreen is among the cheapest common claims a motor insurer handles, and it has become dearer for the same reason as the rest. Cameras and sensors mounted behind the glass need recalibrating after a replacement, so a job that once meant fitting a pane now includes a diagnostic appointment.

The government has been here before. Its Motor Insurance Taskforce published a final report in December 2025 that set out actions across departments and regulators aimed at bringing claims costs down, covering the cost of repairs and vehicle theft among other things (DfT, 10 December 2025). The report found a strongly competitive market and put its emphasis on claims costs rather than on how insurers price risk. Ministers said they would keep delivering the actions it set out (DfT, 10 December 2025), and the taskforce itself has since concluded, leaving delivery to individual departments.

What it means at renewal

None of this means every premium is about to jump. Insurance is a competitive market, and the ABI's own release notes that premiums have been competitive enough to fall slightly while claims costs rose. Competition is also why a turn, when it comes, can be quick. Insurers that have spent a year pricing below the claims trend have less room to absorb a bad quarter.

For a driver, the price that matters is the renewal quote rather than the national average. Insurers have been required since 2017 to show last year's premium on the renewal notice and to prompt customers who have renewed four times in a row to shop around (DfT, 25 June 2026), which makes the year-on-year comparison simple to run. Shopping around remains the one lever a driver controls.

The car matters as much as the quote. Repair inflation has not been confined to one fuel type. The FCA found average repair costs up 42% for petrol and diesel cars, 44% for electric cars and 68% for hybrids between 2019 and 2023, so the cost of a bump has climbed whatever sits under the bonnet. What varies more is the model, because a car with sensors in the bumper and cameras behind the glass costs more to put right than a simpler one. Our guide to what an electric car really costs to insure explains why the fuel-type gap has been narrowing, and the October used values show how quickly the market reprices the cars themselves.

Anyone buying used should get an insurance quote before agreeing a price. A cheap car with expensive glass and sensors can cost more to cover than a dearer one with simpler panels, and the difference shows up every year rather than once.

What a 7% correction would add

If claims inflation runs at 7% and the average premium rises by the same amount, £562 becomes about £601, an increase of £39. That is arithmetic rather than a forecast, and Sabre is explicit that the timing of any market-wide correction is uncertain.

The figure to watch in the next quarterly release is therefore the gap between the two numbers, not the premium on its own. Payouts of £3.2bn a quarter work out at about £1.07bn a month, set against an average premium of £562. Sabre's conclusion from the same trend is that material market-wide increases are likely to be required. Whether the rest of the market follows, and how soon, is the open question.

For now the average is falling and the claims bill is not. Drivers renewing over the next few months are pricing against that uncertainty whichever way it breaks.

Sources

ABI, "Motor insurance payouts remain at £3.2 billion for second consecutive quarter", 9 November 2026. https://www.abi.org.uk/media-hub/news-post/motor-insurance-payouts-remain-at-32-billion-for-second-consecutive-quarter
ABI, "Record £3.2 billion paid out to support motor insurance customers in Q2 2026", 29 July 2026. https://www.abi.org.uk/media-hub/news-post/record-32-billion-paid-out-to-support-motor-insurance-customers-in-q2-2026
Sabre Insurance Group, "Trading Update", 20 October 2026. https://otp.tools.investis.com/clients/uk/sabre_insurance/rns/regulatory-story.aspx?newsid=2114230
Financial Conduct Authority, "Motor Insurance Claims Analysis: multi-firm review", July 2025. https://www.fca.org.uk/publication/multi-firm-reviews/motor-insurance-claims-analysis-multi-firm-review-2025.pdf
Department for Transport and HM Treasury, "Motor Insurance Taskforce: final report", 10 December 2025. https://www.gov.uk/government/publications/motor-insurance-taskforce-final-report
Department for Transport, "Motor Insurance Taskforce report", written statement to Parliament, 10 December 2025. https://www.gov.uk/government/speeches/motor-insurance-taskforce-report
Department for Transport, written answer on steps to lower car insurance costs, 25 June 2026. https://questions-statements.parliament.uk/written-questions/detail/2026-06-17/10994