October 18 2007
INSURANCE companies claim to have cut motor insurance premiums by up to 10pc this year and have been warned there is little justification for future increases.
A survey by consultants Deloitte showed that 80pc of insurers said that they had cut premiums in 2007, the majority by up to 10pc, while one-in-10 had raised prices and the remainder had kept them at 2006 levels.
But motor insurers were split as to whether prices will rise or fall next year, with 40pc predicting drivers were likely to see price increases of up to 10pc in 2008, and the same number predicted reductions by that amount.
However, Deloitte said their research indicated uncertainty among industry players about profitability and noted companies might have to accept that the higher profits experienced in previous years might now be a thing of the past.
"We believe that motor insurance companies will come under pressure to decrease premiums — as the general public becomes more sympathetic with road safety measures and the PIAB [Personal Injuries Assessment Board] continues to have a positive impact on compensation culture, there will be very little justification for increased premiums," said Glenn Gillard of Deloitte.
"This will ultimately affect profitability — the recent years of exceptional profits may well be over," he told a Deloitte seminar on motor insurance.
While the car market continued to grow, increased competition and more shopping around by consumers meant only two major companies — FBD and Quinn — had increased their market share over the last year, said Dick Tulloch, Director of Actuarial Services with Deloitte.
The Insurance Statistical Review 2006 showed healthy profits in motor insurance, albeit not as high as in the past, but this did not always reflect their underwriting performance as insurance companies had released a significant amount of reserves.
"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?" said Mr Tulloch.
There were mixed feelings in the industry with 45pc of those surveyed more optimistic than last year, and 35pc more gloomy about prospects.
However, over 70pc were more optimistic about road safety and believed the PIAB was having a positive impact on compensation culture.
There is set to be more cars on the road than drivers by 2009 if current trends continue with the number of vehicles insured growing by 5pc per year said Mr Tulloch.
