Car repair costs rise too fast for UK insurers to keep up
The cost of car repair has shot up so fast that it’s piling pressure on UK insurance companies.
Sabre Insurance Group Plc shares plunged more than 42% on Thursday after warning that everything related to an insurance claim — the car parts, paint, labor and the cost of replacing the vehicle — has risen faster than expected.
The update also sent a swathe of bigger rivals plunging, with Admiral Group Plc and Direct Line Insurance Group Plc dropping 18% and 13%, respectively. Other insurers also fell, including Saga Plc, Hiscox Ltd. and Beazley Plc.
While Sabre is a relatively small company, it’s a clear signal that other insurers will also be facing a squeeze on profits, and firms will find it more expensive to pay out on policies sold when times were cheaper. Sabre reported an 81% plunge in first-half earnings before tax.
“Inflation bites hard,” Peel Hunt analyst Andreas Van Embden wrote in a note, “An earnings recovery will take time and returns will be temporarily low.”