Motor insurers are grappling with a profit squeeze as claims costs accelerate faster than premium increases, according to new industry data. UK motor insurers paid £1.01 in claims and expenses for every £1 in premiums last year, producing a net combined ratio of 101 per cent. This unsustainable trend is forcing major players like Admiral and Aviva to raise prices further.

Self-driving cars were once seen as an existential threat to the industry, but executives now expect widespread adoption only by 2040. That gives insurers breathing room, though the current business model remains under pressure. Scale helps the largest players, but collectively the sector has lost money in three of the past four years. EY forecasts the net combined ratio will worsen to 111 per cent in 2026.

Premium increases have already hit consumers hard, with average comprehensive motor insurance costs rising over 40 per cent between 2021 and 2024 before falling back 9 per cent last year. However, insurers' costs have risen even faster due to skills shortages, supply chain issues, and increasingly complex vehicles. Many smaller insurers may not survive until autonomous vehicles arrive, as the UK market continues consolidating through major deals like Aviva's £3.6bn takeover of Direct Line.