Government motor insurance plan puts claims costs in focus as taxi and PHV drivers eye relief
- Perry Richardson
- 32 minutes ago
- 5 min read
The Government’s Motor Insurance Taskforce has published its final report, setting out a package of regulatory, enforcement and infrastructure measures aimed at stabilising and ultimately reducing motor insurance premiums after sharp rises in recent years.
For taxi and private hire vehicle (PHV) drivers, where insurance is a critical fixed cost, the direction of travel points towards sustained pressure on claims costs rather than headline price controls.
The report notes that average comprehensive motor premiums for private motorists peaked at £635 in the first quarter of 2024 before falling to £551 by the third quarter of 2025, a £56 year-on-year reduction and roughly back in real terms to 2017 levels. However, overall claims outgoings reached £3 billion in the third quarter of 2025, with £1.9 billion of that related to vehicle repairs, keeping strong upward pressure on what insurers charge commercial and consumer customers alike.
At the core of the taskforce’s plan are five strands: ensuring a “well-regulated” insurance market, improving claims processes, making roads safer, tackling uninsured driving and fraud, and strengthening the vehicle repair sector. The Financial Conduct Authority (FCA) will continue work on premium finance and smart data, including a 2026 review of how customers spread annual policy costs, while the Government leans on competition and its Consumer Duty rules rather than direct premium caps. For taxi and PHV fleets that rely heavily on instalment plans and specialist commercial cover, future FCA decisions on premium finance could influence cash flow and the cost of paying for high-value policies over time.
Taskforce report sets out regulatory, road safety and fraud measures that could influence commercial motor premiums and risk management across the hire and reward sector.
Claims management reforms may be among the most tangible drivers of change for the hire and reward market. The FCA has identified a near 50% rise in the cost of replacement vehicles between 2019 and 2023, fuelled by longer repair times and widespread use of higher-specification credit hire rather than standard courtesy cars.
The report highlights ongoing work between the Association of British Insurers (ABI) and the Credit Hire Organisation to revise the General Terms of Agreement, which caps credit hire rates for signatories. Any tightening of those arrangements, and efforts to reduce referrals to third-party claims intermediaries, could reshape the way taxi and PHV drivers are supplied with replacement vehicles after collisions and may limit the scope for more expensive credit hire models in non-fault incidents.
Road safety and road condition policy also feature strongly and are directly relevant to high-mileage professional drivers. The Department for Transport intends to publish the first Road Safety Strategy in over a decade and is committing £24 billion of capital funding between 2026-27 and 2029-30 for motorways and local roads, including a £1.6 billion local maintenance package in 2025-26. The report links that investment to an ambition to fix the equivalent of more than seven million additional potholes in 2025-26, targeting one of the key causes of avoidable vehicle damage. For taxi and PHV operators routinely contending with suspension and wheel damage, improved carriageway condition could, over time, lower repair claims and downtime, though further cuts to urban speed limits and new safety interventions may also affect journey times and operating patterns.
Enforcement against uninsured driving and fraud sits alongside these infrastructure measures. Confirmed motor insurance fraud cases rose from 4,423 in 2019 to 6,263 in 2023, with losses climbing from £49 million to £65 million. The FCA will push social media platforms to take down ghost broking and “finfluencer” content, while the Home Office’s Insurance Fraud Charter seeks stronger data sharing and swifter criminal justice outcomes. In parallel, the Government will review penalties for uninsured driving and continues to back schemes such as Continuous Insurance Enforcement and Operation Tutelage. For the taxi and PHV trade, which often competes with non-compliant or bogus operators, tougher action on fake policies and uninsured vehicles should support compliant licensees but may also lead to more frequent checks on documentation and insurance status.
Electric and hybrid vehicles, increasingly prominent in urban taxi fleets, are singled out as a cost pressure. The FCA’s analysis finds these vehicles are currently more expensive to repair than petrol or diesel models, contributing to higher claims outlays. In response, the Department for Transport plans to consult on battery health measures to give clearer information on battery condition in used EVs, which could influence residual values and underwriting assumptions for electric taxis. The report also notes that ministers are considering whether to mirror European rules that improve independent repairers’ access to EV battery data and repair information. If adopted, that could make it easier and cheaper to repair electric cabs after collisions instead of writing them off or replacing entire battery packs, ultimately affecting comprehensive premiums for EV-heavy taxi fleets.
The wider skills and supply chain agenda is another longer-term factor for the sector. The taskforce links higher repair costs to supply chain disruption, parts shortages and labour constraints in bodyshops. Through its Modern Industrial Strategy and the DRIVE35 programme, Government is committing £2 billion of automotive capital and R&D funding to 2030, plus a further £500 million to 2035, as well as a £100 million “engineering skills package” and reforms to apprenticeships and technical education. For operators, the benefit will only materialise if those investments translate into more repair capacity, shorter lead times and less time off the road for licensed vehicles, which currently feed through into extended credit hire periods and higher combined claim totals.
On pricing fairness, the FCA’s new analysis concludes that people in some demographic groups pay more largely because of underlying risk factors such as higher accident and crime rates in dense urban areas rather than direct discrimination on ethnicity. A chart on page 17 of the report shows car driver casualties per billion miles by age and sex, with elevated risk at both younger and oldest age bands. Many taxi drivers sit in the middle age brackets where casualty rates are lower, but they also clock far higher mileages than typical motorists. Any further refinement of risk models, combined with telematics and smart data initiatives, could encourage insurers to differentiate more sharply between professional fleets with strong safety records and those with higher incident rates.
The report stops short of direct fiscal relief such as cutting Insurance Premium Tax or mandating social-style tariffs for low-income or high-risk groups. It also rules out moving to a “no-fault” compensation system, arguing that existing tort law supports individual accountability and that radical change would create uncertainty. For the taxi and PHV industry, the message is that any easing in premiums will have to come from lower claims frequency and severity, stronger fraud control, and efficiencies in repair and claims handling, rather than headline tax cuts or structural legal reform. That places a premium on operators’ own risk management, data and safety performance as insurers look for ways to segment risk in a market where consumer premiums have started to fall but claims costs remain elevated.
In response to the launch of the Government's motor insurance taskforce report, Jake Attfield, head of strategy at Fair4All Finance, said: "Reforms to motor insurance must ensure that support reaches the people who need it most. Today, around 2.6 million people are effectively priced out of driving because they can’t afford insurance. Improving access to affordable motor insurance could boost the UK economy by an extra £369 million each year. Ensuring that everyone can access fairly priced insurance isn’t just good for drivers - it’s critical for growth and social mobility.
"Beyond what is included in the final report, we hope to see collaboration and innovation to make insurance fairer and more affordable for low-income and financially vulnerable consumers. This needs leadership across industry, regulators and a renewed focus on this issue in Parliament."
