29 June 2023

Advancing technology: A driver of motor claims inflation

By Road Runner

In recent years, the insurance industry has been heavily impacted by claims inflation and motor insurance is no exception to this. In 2021, motor claims pay-out inflation increased more than six percent, taking the average cost per claim up to £5,3491. So, what are the immediate and longer-term impacts of this?

It’s predicted that by 2025, 85 percent of all vehicles globally will be fitted with some type of advanced driving assistance system (ADAS). This comes hand in hand with increasing costs of repair and replacement, as vehicles are becoming more complex.

Semiconductor chips are a key driving factor in the innovation of vehicles and are being used more and more for on-board systems like touchscreens and air conditioning systems.

But while considering rising costs, it’s worth bearing in mind that the average price of semiconductor chips has increased by 95 percent2.

In September 2022, battery electric vehicle (BEV) uptake increased by 35.4 percent and had a 14.5 percent market share3. This advancement in vehicle technology is certainly a plus for the environment, but is making repairs more complex and expensive, requiring specialist knowledge and training for repair work to be carried out.

Driver-assist technology is also an advanced system fitted to vehicles, but this usually requires windscreen calibration to ensure that all cameras and sensors behind the rear-view mirror are working properly.  In addition, there’s the need for specialist skills from a trained professional which comes at an increased cost.

How does this impact my insurance?

The rising cost of repair is likely to outstrip the market value of the vehicle, making total loss settlements more likely.

And there’s more. A shortage of replacement parts and reduced workshop capacity due to staff and skills shortages is resulting in longer repair waiting times, which has a knock-on effect on the length of a claim.  These factors plus a shortage off courtesy cars is also driving up costs for credit hire and credit repair services, which in turn increases the cost of the claim.

At Aston Lark, we recognise that there’s a wide variety of factors currently impacting claims inflation. Many of these factors are out of our control, but we’re committed to supporting you through it all. If you have any questions about your insurance with us, contact us today.