Motor insurance under pressure: FCA outlines causes and solutions to rising costs

In July 2025 the Financial Conduct Authority (FCA) published its report Motor Insurance Claims Analysis on its findings on the causes of increased motor insurance premiums and claims costs.

The FCA considered increases in motor insurance claims costs between 2019 and 2023 and their causes and impact on motor insurance premiums based on information from 12 insurers of various sizes and with different business models, representing over 50% of the UK private motor insurance. It also reviewed these organisations’ claims-handling arrangements and key cost drivers for different claim types.

The FCA undertook the analysis to support the work of the national Motor Insurance Taskforce, established by the government last year to improve the affordability of motor insurance and co-chaired by the Department for Transport and HM Treasury.

Key factors the FCA concluded are contributing to increased premiums and claims costs include:

• the cost of bodily injury claims has increased by £182 million (7% between 2019 and 2023, accounting for 8% of the overall increase in total claims costs during that period. 
• a reduction in the number of accidents resulting in bodily injury claims was more than offset by a larger rise in the average cost of claims. 
• care costs associated with long-term care for are rising, due in part to shortages of care workers. 
• increased use of e-scooters and e-bikes has resulted in uninsured riders causing around £50 million in bodily injury costs annually. 

The FCA states there is also “growing evidence that some claimants are exaggerating, layering and fabricating some minor injury claim types.”  It reports that the risk of fraud continues to have a significant impact on motor claims and that the Association of British Insurers (ABI) estimates the value of confirmed fraud has increased from £49 million in 2019 to £65 million in 2023.

To combat increases in premium prices and claims costs, the FCA has made a number of recommendations to the Motor Insurance Taskforce, including:

• engagement with the ABI and law firms on how best to monitor and manage bodily injury claims trends and to consider the introduction of tariffs for types of bodily injury or increasing the Small Claims Track threshold.
• working with the Solicitors Regulation Authority (SRA) and General Medical Council (GMC) on possible increases to penalties for those engaging or assisting in claim fabrication or exaggeration, particularly any professionals associated with this activity.
• bringing stakeholders together, including industry, trade bodies, the National Crime Agency, SRA and GMC, to enhance detection and prevention of fraud. 
• controlling the use and insurance of e-scooters and instituting public awareness campaigns on micro-mobility safety.

The FCA says it wants to work with the Motor Insurance Taskforce and others to take forward the recommendations in its report with the aim of improving the affordability of motor insurance. The Taskforce is expected to publish its final report this autumn.

The government has already published the UK Insurance Fraud Charter with key firms, and to which the ABI is also a signatory, setting out voluntary measures to disrupt and deter insurance fraud. 

Given the plethora of challenges faced by motor insurers, it is clear it will be essential to secure the cooperation of all stakeholders in the motor insurance sector in order to reduce premiums and slow the pace of claims inflation.