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For years, UK general insurers have focused on reducing indemnity spend as the primary lever for claims profitability. In 2026, that assumption is being challenged. Increasingly, the true cost of claims is not the payout itself, but the operational friction that surrounds it.
Hidden claims leakage is occurring across the value chain. Manual triage, repeated data entry, unnecessary handoffs, delayed supplier engagement and inconsistent decision-making create a silent drain on claims performance. While claims inflation continues to attract attention, operational inefficiencies are compounding the problem. The ABI reported that UK motor insurers paid £2.9 billion in claims during Q1 2026, with average accidental damage claims rising 8% quarter on quarter, reflecting continued pressure on insurers’ margins. [abi.org.uk]
The implication is clear: indemnity spend reduction starts with operations. Every day a claim remains unresolved, every rework cycle and every manual touchpoint add cost. According to a 2026 Claims Insights report, 58% of insurers reported rising claims cost and complexity, while AI adoption in claims resolution increased from 47% to 73% in just twelve months.
This is where AI is reshaping claims transformation. The next frontier is not simply automating tasks but orchestrating decisions. Modern AI models can analyse claims characteristics, policy data, historical outcomes and risk indicators to recommend the next best action at every stage of the claims journey. Industry research shows that AI-driven claims operations can reduce processing costs by 30% to 40% and significantly accelerate resolution times. [BCG]
For UK insurers, the opportunity is substantial. The winners in the next era of claims management will not be those who merely settle claims efficiently. They will be those who eliminate leakage before it becomes loss, empower handlers with intelligent decision support and transform claims operations into a source of competitive advantage. After all, the cost of claims is no longer in the claim. It is in everything that happens around it.
As insurers rethink where claims costs truly originate, the focus is shifting towards operational efficiency and decision quality. Huntswood partners with insurers to assess Consumer Duty maturity, enhance outcomes monitoring frameworks, and provide independent Board-level assurance on customer outcomes. If you would like an independent and fair assessment review of your Consumer Duty arrangements or support in responding to the FCA’s latest expectations, we would be happy to help.