Aviva’s Spencer calls for double-digit commercial motor rate rises

Aviva’s UK general insurance chief executive Robin Spencer says his commercial motor business needs double-digit rate rises, after it reported a combined operating ratio (COR) of 113% in the first half of 2013.

The UK commercial motor COR was a much healthier 101% in the first half of 2012.

The company’s UK commercial motor business had to strengthen reserves by £45m in the first half of the year, because of worse-than-expected bodily injury claims. These added 15 percentage points to the COR.

Speaking to journalists following the release of Aviva’s first-half results, Spencer said the commercial motor book had achieved 9% rate rises in the first half of 2013.

More to do in motor

But he added: “As we go into the second half of the year, we are probably going to have to see that in the double digits. There is certainly more to do across commercial motor.”

Spencer also reiterated the need for rate rises in commercial property, despite improved results, thanks to a lower level of weather claims.

Aviva’s UK commercial property COR improved by 17 percentage points to 86% from 103%.

The commercial property lines have been flattered somewhat by the weather in the first half’

Spencer said: “The commercial property lines have been flattered somewhat by the weather in the first half. That shrouds a little bit the underlying position, which is that we still need rate rises in those lines as well. There is still more to do.”

Laspo impact

On the personal lines side, Aviva cut back its UK personal motor net written premium by £71m because of rising competition and falling rates.

Insurers have been cutting personal motor rates in anticipation of improved claims experience, following the Laspo legal reforms that came into force in April.

AA Insurance reported at the end of July that rates had fallen 9.8% over the past year.

Personal rates caution

However, Aviva is taking a cautious approach to cutting rates – it lowered personal motor rates by 1% in the first half of 2013.

Spencer said: “It is very early to tell exactly what the reductions in frequency and severity [of claims] we are going to see across the market.

“As soon as we get a better take on what the reductions will be,  given the price elasticity of the UK motor market, I think we will be able to grow back into that market.”