UK drivers are being warned to prepare for a fresh rise in motoring costs beyond rising pump prices.

Car insurance premiums are on the rise as repair costs push up insurance claims.

As the ongoing Middle East crisis caused by Israeli/US attacks on Iran continues to block supplies of oil, gas and numerous other materials through the Straits of Hormuz, scarcity increases demand, and increases prices. 

Premium players

New analysis from specialist motor insurer ERS forecasts that motor claims inflation will reach between 8% and 10% in 2026, reversing a brief period of relief in 2025 when average private car insurance premiums fell by around 10%.

The insurer warns that the situation could worsen further depending on how long the conflict continues and whether key global shipping routes such as the Strait of Hormuz remain disrupted.

It’s a warning echoed by Heritage Car Insurance, which says the scale of cost pressures now building across the automotive supply chain is comparable only to those seen during the COVID-19 pandemic.

Lost in transit

At the heart of the issue is a broad-based supply chain shock affecting nearly every component involved in building and repairing vehicles.

Since the conflict escalated, oil prices have surged by around 60%, gas by 66%, and shipping costs by 6%.

Meanwhile, raw materials essential to vehicle production have also risen sharply, with steel surcharges increasing by 30% and aluminium prices climbing to similar levels.

These materials are fundamental to modern vehicles.

Aluminium is widely used in body panels, suspension systems and engines, while polypropylene, derived from oil, is a key component in bumpers and interior trims.

As these costs rise, they feed directly into repair bills and, ultimately, insurance claims.

The war has also disrupted global supplies of critical industrial gases.

Qatar, a major producer of liquid natural gas and helium, has been affected by regional instability, including damage to production facilities.

Helium, which is essential for semiconductor manufacturing, has seen prices increase by around 40%.

This adds further pressure to the cost of microchips, which now underpin everything from braking systems to engine management in modern cars.

Contingency planning

Manufacturers are already reacting.

Some, including major global brands, have begun scaling back production due to rising energy costs and shipping uncertainties.

Industry analysts warn that if production slows significantly, it could trigger a repeat of post-pandemic conditions, when shortages pushed second-hand car prices up by as much as 30%.

Repair costs are also rising before supply shortages have fully taken hold.

The National Body Repair Association has recommended a £35 energy surcharge on repair bills to reflect higher operating costs.

At the same time, inflationary pressures are expected to push wages higher, increasing labour costs in an industry already facing skills shortages, particularly in the repair of electric and hybrid vehicles.

Delays in obtaining parts are expected to compound the problem.

During the global semiconductor shortage, vehicle repair times increased significantly, with hire car durations rising by more than 50%.

Insurers fear a similar trend could emerge, forcing them to write off more vehicles as total losses when repairs become uneconomical or parts are unavailable.

This, in turn, increases the average cost of claims.

Be prepared

Market forecasts had already painted a challenging picture before the latest geopolitical developments.

Analysts at EY previously predicted that the UK motor insurance market would operate at a loss, with a combined operating ratio of 110%.

The latest developments suggest those projections may now be overly optimistic.

Mark Wilkinson, Managing Director at Heritage Car Insurance, said: “In nearly sixty years of insuring drivers, we have seen several market shocks, but the combination of factors now at play is particularly serious. The Iran conflict is not a distant geopolitical event; it is already being felt in the price of materials and components used in every vehicle on the road.”

He added, “Drivers who benefited from falling premiums in 2025 should not expect that trend to continue. The data is clear, costs are rising across the entire supply chain, and that will inevitably feed through into premiums.”

Experts are advising motorists to prepare for higher renewal costs and to take proactive steps, including comparing quotes early, reviewing levels of cover and ensuring policies include adequate provision for replacement vehicles during extended repair periods.

Read the full ERS report here