The UK motor insurance market is forecast to remain loss-making over 2026 and 2027, according to EY’s latest analysis, and the deteriorating outlook is expected to have a knock-on effect on premiums, with rates likely to rise over the next two years.

Following a profitable 2024 of 98% net combined ratio, the market fell back into the red in 2025, with EY estimating a final NCR of 102%. Greater losses are anticipated this year – with an NCR of 108% forecast. The weaker outlook is being driven primarily by premium rate reductions since late 2024, which are now feeding through to earned premium, alongside continued claims inflation.

After premiums fell by almost 12% during 2025, EY expects motor insurance premiums to increase by 4% in 2026 and a further 12% in 2027 as insurers respond to continued claims cost pressure.

Dan Beard, UK insurance partner at EY, said: “UK motor insurers are navigating a difficult combination of lower earned premium income and persistent cost inflation, with geopolitical tensions adding further complexity.

“Our latest analysis suggests 2026 could be the toughest year of the current soft cycle, with profitability coming under further pressure, before some expected improvement in 2027 as pricing actions feed through. For consumers, this likely means higher motor insurance premiums over the next two years as insurers look to restore margins.”