22 June 2023

Supply chains: 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 driving factors of this inflation is supply chains. Global supply chains have been hit hard by the Ukraine war, Brexit, and the repercussions of the pandemic.

45 percent to 54 percent of the world’s semiconductor-grade neon – critical to produce chips – comes from two Ukrainian companies who have halted operations due to the attacks from Russia2. This stoppage in production has put further pressure on an already limited supply of chips caused by the pandemic, as we saw the demand for cars spike during this time. The situation in Ukraine is also putting pressure on the supply of materials such as wire harnesses, nickel, and palladium which are used in electric batteries and catalytic converters.

What else is impacting supply chains?

  • The UK imports up to 80 percent of its automotive components from the European Union3, worth about £9.8bn
  • A weakening pound has pushed up the cost of many imported items which has in turn reduced the purchasing power for UK importers and manufacturers
  • China’s continued Covid-driven lockdowns have led to delays in important manufacturing and logistics centres, impacting global supply chains

How does this impact my insurance?

Supply chain disruption over key parts and components for vehicles leads to an extended length of time taken to settle a claim as vehicles remain longer at the repairers. There’s also been a rising cost of courtesy vehicles which pushes the cost of the claim up, and therefore, the insurance premium too.

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.