EY predicts 107% combined ratio for UK motor insurers in 2026

By Edward Carron

June 26 - (The Insurer) - The UK motor insurance market is on course to break even in 2025 but is likely to record an underwriting loss in 2026, EY said on Wednesday.

The consultancy said it expects the UK motor market to generate a combined ratio of 107% next year.

The UK motor market produced an aggregate combined ratio of 97% in 2024, its first profitable year since 2021.

EY said a return to rising inflation alongside reduced premiums has led to a deteriorating outlook this year, worsened by tariff-related trade disruption and uncertainty linked to market consolidation.

UK motor premiums, which rose by 14% in 2024 when companies adjusted rates to account for inflation, are projected to decrease in 2025. EY has predicted a 6% reduction in premiums this year.

Inflationary pressures mean premiums are expected to rise by 5% in 2026, EY said.

UK inflation peaked at 9.6% in October 2022 before falling sharply in the following 18 months to 2.8% in May 2024. Since then it has been steadily increasing, reaching 4% in May 2025, according to data from the Office for National Statistics.

Dan Beard, UK insurance partner at EY, said: “Following just one year of underwriting profitability in the last three, UK motor insurers are once again bracing for challenge in an increasingly uncertain market.

"The rapidly changing geopolitical, economic and regulatory picture, alongside increasing levels of consolidation, are posing very real challenges to motor insurers as they look to steer their pricing and portfolios. At the same time, lower premiums charged during the first half of this year are set to impact the bottom line."