Car insurance costs could increase again in 2026 as claims inflation rises across the UK market. This affects all types of vehicles, from everyday cars to classics and performance models.
ERS expects claims inflation to reach 8% to 10% in 2026, driven by rising energy costs, supply disruption and repair pressures.
When insurers pay more for claims, premiums often follow. The impact will vary depending on the type of car you own, how it is used and how it is insured.
What is claims inflation in car insurance?
Claims inflation is the rising cost of settling insurance claims. This includes repairs, labour, parts, hire vehicles and total loss payouts.
Even small increases across these areas can significantly impact overall insurer costs. Over time, this builds pressure on pricing across the market.
For drivers, this means premiums can change even if your personal risk has not.
Why are car insurance costs increasing in the UK?
Car insurance costs are increasing because the automotive supply chain remains under pressure. ERS highlights rising oil, gas and shipping costs feeding into manufacturing and repair expenses.
These cost increases affect every stage of a claim, from sourcing parts to completing repairs. As costs rise across the industry, insurers adjust pricing to reflect higher payouts.
This is why market-wide trends can impact premiums even for low-risk drivers.
Why are everyday car repairs becoming more expensive?
Everyday car repairs are becoming more expensive due to technology and labour costs. Modern vehicles rely on sensors, cameras and electronic systems, which are more complex to repair.
ERS expects wage inflation to reach around 4.2% in 2026, increasing labour costs across the repair industry.
This means even minor accidents can involve higher repair bills, longer diagnostic times and specialist labour, all of which increase claim costs.
Why are used car values still high in the UK?
Used car values remain above pre-COVID levels. ERS reports increases of around 30%, with further pressure possible if supply tightens.
This matters because when replacement costs rise, insurers pay out more on total loss claims. That increase feeds directly into overall claims costs across the market.
If new car production slows again or parts shortages continue, demand may shift back to used vehicles, pushing prices higher and increasing claim payouts further.
How do delays increase car insurance claim costs?
Delays increase claim costs because repairs take longer and hire vehicles are needed for more time. When parts are unavailable, vehicles remain off the road for longer periods.
ERS notes rental durations increased by over 50% during previous disruption, showing how quickly costs can rise.
Longer repair cycles also increase administrative costs and customer disruption, which adds further pressure to overall claims spend.
