Article

Understanding the shifting risk landscape and protecting your future

The claims landscape has changed over the years, what does that mean for your business opportunities and the future of claims costs?

Where claims costs have been heading

Over the past three years, the UK claims landscape has experienced significant pressures. These pressures have fundamentally reshaped how organisations approach risk. Many businesses have likely felt these impacts firsthand.

Claims inflation has become a defining challenge across property, casualty, and motor insurance. Between 2021 and 2025, employers' liability claims costs have steadily increased, despite fluctuating volumes.

The average cost of an employers' liability claim reached £14,458 in recent analysis. This was driven by several persistent factors:

Judicial College Guidelines for personal injury awards increased by an average of 31% across the two latest reviews.
NHS charges continued to rise.
Care costs also kept increasing.

The data reveals a troubling pattern. The number of claims may have reduced, but the cost of each individual claim has risen substantially.

This isn't a temporary fluctuation. Marsh clients saw employers' liability claims volumes decline from 7,735 in 2021 to 2,595 in 2024. That is a significant reduction. Yet the overall financial impact remains severe.

In the property sector, the picture is equally challenging. Claims inflation has been compounded by geopolitical disruption, including the ongoing effects of Brexit and instability in global supply chains.

This has created pressure in several areas:

material shortages;
gaps in skilled labour;
longer rebuild times.

Together, these factors have created a perfect storm for property underwriters and risk managers. Business interruption claims have become increasingly expensive as reconstruction periods lengthen.

Motor claims have followed a similar trajectory. Repair costs have surged due to parts and labour inflation. At the same time, newer vehicle technology, especially in electric vehicles, has added repair complexity and cost. These costs would have been hard to imagine just a few years ago.

The key point is simple: the rising cost of claims reflects real economic shifts. Wage inflation, material costs, and regulatory changes are not temporary. They point to a new operating environment. In that environment, historical claims data may no longer predict future exposure accurately.

What's happening now

As we moved through 2025, the claims landscape began to show signs of stabilisation. But that is not a reason to lower your guard.

Claims inflation continues to affect the three main lines:

employers' liability;
public liability;
motor.

The rate of increase has slowed compared with the previous two years. However, the pressure remains strong.

For casualty lines, the challenge is still acute. Several factors continue to push costs upward:

social inflation;
fraudulent and exaggerated claims;
labour shortages;
regulatory pressure.

Average claim costs have continued to rise year on year. The average employers' liability claim now reaches £15,759, up from £14,458 one year earlier.

In 2025, we recorded 2,260 UK employers' liability claims. This reflects the continuing delays in the notification process. However, when looking at fully developed prior years, 2024 shows 5,569 claims. These figures are still developing as further claims are reported.

What's different now is that the rate of increase appears to be easing. Motor insurance premiums, for example, showed signs of stabilising towards the end of 2025. This suggests that some market pressures may be starting to moderate.

That is encouraging, but it should not distract businesses from the immediate challenge. Claims costs remain significantly elevated compared with historical norms.

Your peers are experiencing the same pressures. Retail and wholesale organisations account for over 46% of Marsh clients’ employers' liability claims since 2021. Transportation, services, and food and beverage sectors follow. Together, these sectors represent concentrated areas of risk.

If your organisation operates in one of these sectors, your exposure may closely reflect some of the highest-impact areas in the UK market.

Property also remains under pressure. Elevated material costs, labour shortages, wage inflation, and more frequent extreme weather events continue to affect claims. Insurers have begun withdrawing from high-risk markets. This is creating capacity constraints. In turn, those constraints are likely to affect renewal premiums and available cover.

What you need to prepare for

The insurance claims environment clients have grown comfortable with is about to change significantly. Structural forces will reshape their exposure, their costs, and the defensibility requirements they'll need to meet – starting in 2026.

The forces reshaping claims

Regulation and technology are moving in parallel. New Judicial College Guidelines have already added 8% to average damages awards (in addition to the 22% a couple of years prior)[1]. Meanwhile, autonomous and electric vehicle systems are multiplying repair complexity and cost.

The Motor Insurance Taskforce Report[2] and the government's Road Safety Strategy[3] are triggering reforms. These reforms are likely to affect both claims frequency and the way disputes are resolved.

At the same time, care cost reforms are creating new employment and working rights frameworks. These are likely to reset liability expectations.

AI is also entering the claims process. This is happening not only on the insurer side. It is also becoming more accessible to litigants-in-person, who can now use tools that were once limited to specialists.

Each of these shifts, on its own, is manageable. Taken together, they are reshaping both the cost of claims and how defensible those claims are.

The hard truth about today's soft market

Businesses are enjoying favourable pricing and broad coverage today. That comfort is temporary. Soft market conditions don't last when underlying claims costs are rising. Loss ratios are already tightening; insurers will eventually succumb and respond with pricing discipline and coverage narrowing.

What clients need to understand now

This isn't about alarm – it's about clarity. Businesses need to map what these changes mean for their specific exposure. A manufacturing business faces different risks from EV repair complexity than a haulage operator. A liability-heavy professional services firm needs to anticipate the impact of higher damages awards in ways a retail business doesn't. Every business needs to understand that "good claims management" is no longer optional risk management – it's a core defensibility practice.

The action

The time to embed defensibility practices is now, not when the market hardens.

That means:

auditing claims frequency and severity data;
identifying where claims are concentrated;
deploying targeted reduction strategies before renewal season.

It also means:

understanding new regulatory requirements before they trigger claims;
putting clear incident response procedures in place;
maintaining strong documentation discipline before claims arise.

You have a window to prepare. The question is not whether these changes will arrive. They will. The question is whether you will be ready, or caught off guard by your renewal terms.

Navigating uncertainty requires expert insight

The complexity of today's claims environment is unprecedented. Claims inflation, regulatory change, technological disruption, and market capacity constraints are converging to create a period of genuine uncertainty for risk managers.

Here's what the data tells us:

Historical claims data may not accurately reflect future exposure. Standard benchmarking approaches may not capture the shifts now taking place across sectors.

Without comprehensive claims analytics, organisations are more exposed to:

inadequate coverage;
missed opportunities to reduce costs;
risks they have not yet identified.

The evidence is clear: organisations that take a proactive, data-driven approach to claims management significantly outperform those that react to claims as they arise. You don't have to wait for problems to emerge. You can identify them now, address them systematically, and reduce both the frequency and severity of – claims.

Your claims environment is changing rapidly. Understanding what's happening – and what's likely to come – is the first step toward protecting your organisation.

If you'd like to explore your claims profile in detail, benchmark your performance against industry peers, and discuss how to reduce your total cost of risk, our claims management experts are ready to help.

Sources

Property, casualty, and motor claims review 2024, Marsh, Published 2025

Property, casualty, and motor claims review 2025, Marsh, Published 2026

[1] https://www.marsh.com/en-gb/services/claims-management/insights/judicial-college-guidelines-inflation-impact-claims-insurance.html

[2] https://www.gov.uk/government/publications/motor-insurance-taskforce-final-report

[3] https://www.gov.uk/government/publications/road-safety-strategy

The information contained herein is based on sources we believe reliable and should be understood to be general risk management and insurance information only. The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such.

Worker repairs wall during construction at local site

Article

Understanding the shifting risk landscape and protecting your future

Where claims costs have been heading

What's happening now

What you need to prepare for

The forces reshaping claims

The hard truth about today's soft market

What clients need to understand now

The action

Navigating uncertainty requires expert insight

Here's what the data tells us:

Sources

Our people

Paul Hutchinson

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