Rising used car prices driving up insurance claims

A surge in the price of second-hand cars is driving up the cost of accident repair claims, according to UK insurance provider, Direct Line.

It said that inflation was slightly above its expected range of three to five per cent, mainly because of the rise in the cost of second-hand vehicles.

The supply of new cars has been severely restricted by the shortage of computer chips for components, driving up demand for used cars.

Customers in accidents where the car is a write-off are paid out according to its market value. Whilst payouts were therefore higher, the insurance company said it had been able to mitigate the impact by using its in-house vehicle repair operation.

Chris Weeks, director of the National Body Repair Association (NBRA), the trade association for car body repairers in the UK, warned that there is a “danger” that some insurers may not recognise this fact, and instead will “simply think that repairers are charging too much”.

“There is a real possibility that insurers will try to counteract the inflation they are seeing, which is entirely out of the control of repairers by trying to reduce repairer margins even further,” he said.

“We would urge insurers to absorb this change themselves by altering premiums, rather than trying to offset the cost by squeezing the supply chain further than it already has done.”