20 July 2023

Labour shortages: 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 by more than six percent, taking the average cost per claim to £5,3491.

One of the key reasons for this is a shortage of labour. There’s a combination of factors which have led to a “skills crisis” in the UK automotive industry which include:

  • Decreased EU immigration
  • The rising cost of living
  • An aging population
  • Long-term effects of the global pandemic

These factors have contributed   to a shortage of specialist labour needed to work with advanced vehicle technology parts and electric vehicles. Only 6.5 percent of the current motor mechanic workforce is qualified to service electric vehicles2 – which could pose a serious issue if the market for electric vehicles continues to grow.

The Institute of the Motor Industry (IMI) is predicting that by 2031, 160,000 vacancies in the sector will need to be filled3.

How does this impact my insurance?

The shortages in labour are contributing to both claims inflation and longer lead times for repair which ultimately has an impact on claims settlements.

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.