2024 Commercial Motor Insurance Market Outlook

The motor insurance market has faced a turbulent period in recent years, with challenges stemming from COVID-19 disruptions, production issues, and inflationary pressures. These factors have resulted in tougher conditions and higher premiums. While some of these challenges have subsided, new factors are now influencing the market. The rapid rise of electric vehicles (EVs), connected cars, and autonomous vehicles indicates a significant shift in the industry. This makes it difficult for insurers to accurately predict future claim costs. As a result, the hard market is expected to continue until 2024, with potential premium increases, particularly for policyholders with large fleets or a history of losses. However, fleets that perform well, with effective risk management strategies and comprehensive driver training programs, will be in the best position to navigate the commercial motor insurance market in the upcoming year.

Key Developments and Trends to Watch Out For:

Driver Shortages - The surge in e-commerce during the COVID-19 pandemic has created a high demand for delivery drivers, resulting in a significant shortage. While some businesses have taken proactive measures to expand their talent pool through recruitment and retention strategies, others have had to lower their applicant standards to fill open positions. Unfortunately, this strategy may lead to increased commercial motor losses and related claims in 2024. 

Inflation - Inflationary pressures have caused motor parts and associated vehicle repair expenses to rise. According to the Association of British Insurers (ABI), the cost of vehicle repairs increased by 32% in the third quarter of 2023, reaching a quarterly record of £1.6 billion. Although inflation is expected to stabilize in 2024, the economic landscape remains uncertain, potentially impacting premiums. Promptly reporting accidents can help fleet managers control costs and improve outcomes.

Increased Crime - The value of second-hand vehicles has significantly increased in recent years, making them attractive targets for criminals. ABI data shows a 35% rise in payouts for vehicle theft (from and of vehicles) in the third quarter of 2023 compared to the previous year. Cargo theft has also seen an uptick, with criminals targeting essential items such as food and beverages. The inflated costs of goods and services may lead to continued crime in 2024.

Evolving Technology - Vehicles have become more advanced and integrated new technologies, such as blind-spot cameras, GPS devices, and other sensors, to enhance driver safety and optimize fleet operations. When implemented correctly, this technology has the potential to significantly reduce road accidents. However, vehicles with extensive technological features may be more challenging to repair, potentially leading to higher premiums. For example, the ABI reports that claims for EVs may be 25% more expensive and take 14% longer to settle compared to internal combustion engine vehicles. Overall, technology can both aid and hinder the market in 2024.

Tips for Insurance Buyers:

- Consider the benefits of fleet telematics systems and other technology solutions to gather real-time data that can aid in risk management efforts. Continuously assess the risks associated with technology use, particularly in terms of data collection and storage.

- Establish effective onboarding processes for new drivers and regularly provide training on safe driving techniques. Implement a comprehensive retention program to retain experienced drivers. This can include offering upskilling opportunities, seeking feedback from drivers regarding working conditions, and implementing measures to enhance employee well-being.

- Prioritize accident prevention initiatives and establish proper protocols for post-accident investigations.

- Consult with your insurance professional to determine if any adjustments to your commercial motor policies are necessary.