UK Home and Motor Insurance in 2026: Calm Averages, Noisy Reality and Why Context will Matter More than Ever

Written by Ian Hughes | 18/12/25 12:55

2026 may look calm in the averages for both home and motor insurance, but the market will not behave calmly. After a tough 2025 defined by falling competitive prices, fewer shoppers, stubbornly high claims costs and intensifying pressure on insurers, small headline movements will mask much bigger shifts underneath. It is those segment-level movements, not the market average, that will drive behaviour, competition, and growth.

Start with 2025, because that is what sets up 2026

To understand what 2026 is likely to look like, you have to start with why 2025 was such a difficult year for insurers.

From a consumer perspective, prices eased. In motor, the ABI reported that the average price actually paid fell for three consecutive quarters through 2025, reaching £551 in Q3. On the competitive end of the market, our own data shows just how intense competition became: new business prices in the top 5 price positions on price comparison sites fell between January and November, by around 3.5% in motor and more than 11% in home.

But falling prices did not mean pricing pressure eased for insurers.

One of the defining features of 2025 was that there were simply fewer customers in play. Shopping volumes were down materially compared with the peaks seen in 2024, shrinking the pool of new business available.

Consumer Intelligence data shows this clearly. In the the first three quarters of 2025, 68.6% of home insurance customers shopped around, down from 77.8% in the same period in 2024. In motor, 71.6% of customers shopped around, compared with 83.2% a year earlier. Fewer active shoppers meant insurers were competing harder for a shrinking pool of new business.

At the same time, increasingly stripped-back products and tighter cover levels kept headline prices low at the competitive end of the market. In a market with fewer customers, that combination forced insurers to compete harder on price, despite already thin margins.

Crucially, this played out against a backdrop of persistent and severe claims cost pressure, which did not ease as prices fell. In motor, repair costs continued to rise as vehicles became more complex, parts and labour remained expensive, and theft added further strain. The FCA’s Motor Insurance Taskforce, reporting in late 2025, reinforced this point, concluding that rising premiums in recent years had been driven by external claims cost pressures rather than insurer profits, and highlighting the need for greater claims efficiency rather than further price intervention.

In home insurance, claims volatility was even more visible. Insurers paid out a record £4.6bn in property claims in the the first three quarters of 2025, driven largely by severe weather. Late-year storms reinforced a wider trend: extreme weather is no longer an outlier, and hot, dry summers followed by heavy rainfall increase risks such as subsidence as well as flooding.

Overlay all of that with continued market consolidation, most notably Aviva’s acquisition of Direct Line, which reflects the need for scale and efficiency in a low-growth, high-cost environment, and the picture of 2025 becomes clear. Competitive prices fell, the pool of customers shrank, claims costs stayed high, and pressure on insurer profitability intensified rather than eased.

That combination matters because it shapes how the market behaves next.

The base case for 2026: modest averages, but uneven outcomes

Against that backdrop, the headline outlook for 2026 looks relatively calm.

In motor, the broad market consensus is that premiums rise again, by around 3% on average, after easing through 2025.

In home, the direction is less about prices rising sharply and more about them not falling further. Rebuild cost inflation has slowed, and reinsurance conditions have been less hostile, but recent weather losses make sustained declines difficult to justify.

Put simply, across both markets; average premiums are likely to edge up only slightly.

But that calm is misleading.

Claims costs remain structurally high; weather risk is becoming more frequent rather than exceptional, and insurers are taking different strategic positions on growth, margin and risk. The result is continued variation in what individual customers see at renewal, by postcode, vehicle, property type and insurer appetite.

And that variation, not the headline average, is what drives behaviour.

Why behaviour follows renewals, not market averages

Consumers do not respond to what “the market” is doing. They respond to their own renewal.

Switching levels across both home and motor are already low by historical standards, reflecting pricing reforms, reduced savings from shopping around, and a greater focus on service and claims experience.

Consumer Intelligence data shows that 35% of both motor and home policyholders switched insurer in the the first three quarters of 2025, reinforcing just how muted churn has become across both markets. This low‑switching starting point matters.

Where renewals are stable, customers are far less inclined to engage. Where renewals move sharply, shopping returns quickly, even if the average premium barely changes.

We saw that pattern clearly in 2025. The proportion of customers receiving renewal increases continued to fall over the year, helping to suppress shopping and switching overall.

By Q3 2025, the proportion of drivers receiving a renewal increase had fallen to 46%, down from 68% for the same period just two years earlier.

But volatility never disappeared. Some customers still saw large changes, and those were the customers most likely to shop.

The same dynamic applies in home insurance, with a different trigger. Pricing reforms reduced the traditional loyalty penalty, dampening price-led switching. But claims experience, particularly following weather events, remains a powerful catalyst. In a low-switching market, a poor claims outcome can prompt customers to move even when price differences are relatively small.

Across both markets, the behaviour is consistent:

Stable renewal → low engagement

Sharp renewal movement → immediate shopping

That is why averages are such a poor guide to what actually happens next.

What this means for the market in practice

If averages stay relatively calm, but outcomes remain uneven; the implications are practical rather than theoretical.

Growth becomes less about headline rate changes and more about share movement. When the market only moves a few per cent overall, who wins and loses customers matters more than market size growth.

Expect continued dispersion by brand and fast rotation on comparison sites. Different insurers will make different trade-offs between growth and margin, producing rapid winner-and-loser cycles in specific segments rather than a single, tidy market trend.

Underwriting discipline becomes more targeted. In home insurance, that means sharper differentiation by postcode and risk, alongside more emphasis on prevention and resilience. In motor, it means an even stronger focus on claims control, including repair pathways, fraud detection and automation, not as a technology story, but as a cost and customer outcomes story under ongoing regulatory scrutiny.

Relatively stable pricing opens the door to propositions beyond single-product price. With churn lower and acquisition costs high, insurers are likely to push harder on multi-product relationships, particularly home and motor together, competing on value, service and simplicity rather than price alone.

Final thought: why Consumer Intelligence matters in 2026

In a year like 2026, strategy does not succeed or fail on the average premium. It succeeds or fails on what happens underneath it.

Which segments are heating up?

Where is churn quietly returning?

Which competitors are pushing for volume, and which are pulling back?

And, most importantly, what is actually driving or impeding your own brand’s performance?

That is where Consumer Intelligence comes in. We do not just track headline prices. We give insurers a full-context view of the market as customers experience it, how pricing is moving by segment and postcode, who is winning and losing on the comparison sites, and what is really driving shopping and switching. That visibility allows insurers to act early, adjusting pricing, propositions or strategy, rather than reacting after share has already moved.

In a market that looks calm on the surface but noisy underneath, context is not a nice-to-have. It is the difference between reacting late and competing well.

View full post