Towers Watson says increasing premiums to combat fraud will not last
Motor insurers that focus on claims handling rather than pricing stand a better chance of returning to profitability quickly, says Towers Watson.
Speaking in response to the House of Commons transport committee's short inquiry into the cost of motor insurance earlier this week, George Maher, senior consultant at Towers Watson, said: "The recession is presented to the Commons transport committee as a defence for soaring premiums during a year that has seen a huge spike in personal injury claims and fraud, both of which have harmed insurers' profits.
"The lion's share of premium increases for many insurers is to pay for fraudulent claims, supported by our research which indicates just over £80 per policy is set aside for this cost.
"The current strategy of increasing premiums in response to spiralling fraud is not a sustainable solution not only for a market we expect to remain unprofitable until at least 2015 but also for the increasing number of drivers hit by rocketing premiums."
Maher added: "Companies that focus on claim handling techniques instead of an over-reliance on pricing stand a far better chance of seeing a return to profitability via a drop in the number of third-party bodily injury claims, a steady ratio of claimants-to-claim and severity increasing in line with long-term inflation trends."
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