2. Inflation Has Quietly Ravaged the Entire Industry
You’ve felt inflation everywhere — at the supermarket, on your energy bills, when filling up at the petrol station. What many UK drivers don’t realise is that inflation has hit the insurance industry just as hard, if not harder.
Car parts sourced from overseas have been affected by global supply chain disruptions. The cost of shipping, manufacturing, and even raw materials like steel and aluminium have all risen sharply. When a replacement part that cost £80 two years ago now costs £130, that difference has to come from somewhere.
Labour costs have risen too. Bodyshop technicians, paint specialists, and mechanics are all earning more — as they should be — but those wage increases feed directly into the final bill that insurers receive.
Here’s something that surprises many people: insurance companies essentially set premiums based on what they expect future claims to cost, not what claims cost today. So when inflation is running hot and unpredictable, insurers hedge by pricing in even more uncertainty. That means you end up paying for a risk that might not even materialise.
The frustrating truth is that even if inflation eases tomorrow, insurance premiums rarely fall as quickly as they rose. The industry is slow to pass savings back to consumers — and far quicker to pass costs on.
