2025 is predicted to be a year of claims inflation in the low value motor injury claims space as the planets of increasing mixed injuries, higher whiplash tariffs and judicial college guidelines valuations align.
But what are the indicators leading to this prediction, will it really come to fruition, and just how high claims inflation might be?
The year 2024 was arguably a vintage one for the whiplash reforms as the Supreme Court confirmed how to approach the valuation of mixed injury claims, the judicial college guidelines uprated valuation bands, and the functional issues with the OIC portal and linked applications improved. ‘It’s time to catch our breath’ was the message from both claimant and compensator stakeholders, pointing to 2025 being a year of consolidation and stability. However, there is some trepidation as the market waits for the spectre of claims inflation to raise its head in the battle to control claims costs for motor insurance consumers.
But is claims inflation really happening in 2025?
Let’s start with the data.
The Official Injury MI tells us that the average values paid for represented tariff and for non-tariff for Q1 of 2024 were £741 and £981 and for Q4 were £753 and £1,033 – increases of 1.6% and 5.3%, respectively. The differences are hardly earth shattering but they are arguably representative of an increasing trend, particularly for non-tariff values. And our own data sources from benchmarking demonstrated that average aggregated tariff and non-tariff values increased 2% quarter-on-quarter in 2024 except for the last quarter, which saw a fall of 2% – we are now reviewing this to understand why and to determine whether this was an anomaly or something else.
Again however, these are not indications that claims inflation is about to soar. Assuming our Q4 result was an outlier, the data confirms some claims inflation but not as significant as might have been expected after the decision in Rabot and Briggs and the publication of the judicial college guidelines.
So, are there any other indicators that can help us predict claims inflation patterns for this year?
Let’s consider mixed injury claims profiles and severity.
The Official Injury MI shows that claims types did not significantly shift through 2024, with the presentation of mixed injury profiles steady at 66% for Q1 and 69% for Q4. However, these statistics are taken from injury descriptions set out in SNCFs and often not all are carried through to the medical report. Our own data sources are arguably more representative as the presentation of mixed injury claims profiles is pulled from medical reports and shows that the frequency from the primary and secondary market combined remained stable at 52.13% for Q1 and 52.88% for Q4. And there is no reason to suggest this picture is likely to change significantly for 2025.
What about mixed injury profiles by injury type? Does this demonstrate increasing injury severity across the OIC portal, pointing to claims inflation for this year? Looking at the top five injury types by frequency, our data sources suggest not. The percentage presentation frequency has moved very little from Q1 to Q4 of last year, with increases of just 0.23% for hands/wrists, 0.17% for knees, 0.03% for chest, 0.08% for arms and 0.22% for leg injuries.
So, if mixed injury presentation rates and non-whiplash injuries by category are not indicating the risk of claims inflation this year is there anything else to give us some insight – such as the risk of claims displacing from the OIC portal to the MOJ portal?
The risk of claims that would have commenced in the OIC portal now being submitted into the MOJ portal on claims value may give some insight into the overall claims inflation picture for this year. An indicator is the volume of settled claims in the OIC portal last year where compensation for the injury was £3,500 or more as these are the claims profiles likely to be displaced by claims inflation across this year. But again, our data sources suggest that the percentages are very low with Q1 of 2024 at 3.18% and Q4 at 4.47% and the average for last year at just 4.07%.
So, the risk of claim displacement looks to be low as well.
Where does this leave claims inflation for 2025?
Perhaps the best indicator are the average aggregated tariff and non-tariff increases/values paid, which 2024 data suggests were up to 5%. If so, is this our prediction for claims inflation for 2025 in the OIC portal? The answer is yes and no, as any effect of the increases in the whiplash tariffs will have to be accounted for, but this may not start to wash through until next year for settled claims after the accident occurred from 31 May, and we may see an uptick in the frequency of mixed injury profiles driving up injury severity.
Either way, what is becoming clear in terms of predictions is that soaring claims inflation is unlikely to come to fruition in the OIC portal this year – or perhaps ever.
What remains to be seen however is whether the balloon has burst or whether it will continue to rise, albeit gently, into the stratosphere?
Only time will tell.
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