Cat is one of our Finance Apprentices here at Vista, this week, we asked her to tell us about her journey to Vista Insurance
Why are the costs of claims rising?
13/04/2022
Why are the costs of claims rising?
Over the last year the cost of living has risen because of the Consumer Price Index (CPI) increase.
Factors include higher energy costs, transport and fuel, supply chain and shipping costs all adding pressure.
We have produced a handy guide, looking at the influences on claims trends and the impact on claims costs.
Disruption to the supply chain
- A microchip shortage has resulted in global delays in new vehicle manufacture and a surge in value of second-hand cars
- Longer repair times and lack of available parts has affected hire car lead times, plus a shortage of hire vehicles available for drivers
- Global fuel shortage and cost increase
- Sourcing of raw material and labour in the construction sector has resulted in rising costs for property claims
- Covid absence across all sectors
Brexit
- Skilled worker and HGV driver shortages, unskilled workers = increase of accident/incident
- Supply chain disruption, labour supply and lack of materials, high demand and longer claims driving up costs
- Staffing issues – turnover, recruitment and retention
Covid
Travel
- More people working from home has seen a decrease in property claims – e.g. theft and escape of water
- Increase in bike theft as people change commuting habits
- Van and lorry traffic has risen resulting in higher commercial vehicle claims
- Fewer lower impact (minor bump) claims have meant the average cost of claim has risen
Workplace
- Increased liability claims from Covid procedures and systems of work, slips on sanitiser and falling protective screens resulting in injury
Future trends:
- Potential for future claims linked to long Covid
- Claims from home working assessment failures
- Financial pressure and redundancies – claims against employers
Vehicle technology
- EV cars are becoming more popular – last year half a million cars on the road were ultra low emission
- Parts are becoming more sophisticated and expensive to replace therefore more vehicles are written off as a total loss
- Theft of catalytic convertors is still a big problem
Whiplash Reforms
- Since the reforms there have been longer delays in obtaining medical reports and court hearings
- The lifecycles of claims have increased and therefore so have costs
- Cost of living and work shortages have seen an increase in opportunistic claims
- Historic changes to the Ogden discount rate have driven considerable increases to the cost of catastrophic claims*
- Layering of injuries / costs and psychological claims is a tactic seen to be used by solicitors to drive up the value of a claim and take it out of the portal process
- The increases in the National Living Wage will increase loss of earnings claims costs
Climate change
- Increased extreme weather globally
- February 2020 was the wettest on record for the UK with Storm Ciara and Dennis
- Same number of weather related claims in 2022 with Storms Dudley and Eunice
- In July 2021, some areas of the UK experienced a month’s worth of rain in one hour which led to intense flooding and an influx of damage claims
- Hotter and drier weather over the summer months increases the risk of fire and subsidence claims
- The Net Zero ambition of the future will see investment in ‘green technologies’ e.g. electric vehicles/ infrastructure which could lead to increased costs due to the need for more sophisticated materials and labour
How can you help?
- Letting us know about a claim incident as soon as possible, with detailed useful information, gives us the opportunity to control costs of the claim where we can
- Providing thorough information and access to the right people allows us to act quickly following an incident
- Claims can be settled more quickly if video evidence is obtained e.g. Dashcam or CCTV footage
- This video demonstrates the impact that delayed notification of a claim can have on the overall cost
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