High profits may be a thing of the past for motor insurance companies, it was claimed yesterday.
Insurance companies have reduced their motor premiums by an average of 10 per cent this year, in spite of declining profitability, a seminar on motor insurance, organised by Deloitte, was told. Fewer than one company in 10 increased premiums, according to a survey presented at the seminar.
The future outlook for insurance premiums is mixed, with 40 per cent of companies saying prices will rise by up to 10 per cent next year and a similar proportion predicting that they will fall. Deloitte says there is also considerable uncertainty about profitability, and the industry may have to accept that the higher profits experienced in recent years may now be a thing of the past.
Dick Tulloch, director of actuarial services at Deloitte, said that the recently-published review of industry statistics appeared to show healthy profits, albeit not as high as in previous years. "However, further analysis shows that motor insurance companies have once again released a significant amount of reserves. Therefore, the figures do not reflect the actual underwriting performance of the last accident year.
"This begs the question as to how many reserves are left to be released. And will companies be able to maintain profits in this way in coming years?"
Over 70 per cent of respondents believed that the Personal Injuries Assessment Board (PIAB) was having a positive impact on compensation culture.
A similar number were more optimistic about road safety, up from 56 per cent last year, and over 60 per cent of respondents believed that the standard of driver behaviour had improved over the past 12 months.
"It is clear from the mixed responses received in the survey that there is a substantial level of uncertainty within the industry as to future profitability," said Glenn Gillard, partner in financial services at Deloitte. He predicted that motor insurance firms would come under pressure to decrease premiums, and this would ultimately affect profitability.
