The UK commercial insurance market could face sudden, sharp rate hikes if there is no improvement soon, warns Groupama Insurances chief executive Francois-Xavier Boisseau.
“Although there continues to be talk in the market of hardening rates, we have seen little, if any, evidence of any change and this is clearly very worrying,” Boisseau said in a statement accompanying Groupama’s first-half results. “Unless we see some upward movement in prices soon, I fear a major correction might ultimately be necessary and this will be very painful indeed. The market has clearly not learned from the lessons of the past.”
Groupama’s UK operations as a whole, including broking and healthcare, saw profits before tax and amortisation increase 34% to £18.5m in the first half of 2011 (H1 2010: 13.7m). In the insurance division alone, the company said personal lines had turned in a “very encouraging” performance on the back of an improvement in motor and continued good results in household despite the December 2010 freeze.
However, it added that the personal lines performance was offset by a “challenging six months” in the commercial division. "Trading conditions in the UK’s commercial market remain extremely tough and our profitability has again been reliant on reserve releases from previous years,” said Boisseau.
Boisseau also expressed worries about price rises in personal lines motor, which he said started to slow in the first half of the year. “This is of concern while claims costs are rising and the continuing challenges presented by claims farming, credit hire and fraud remain very real. As an industry and for the benefit of our customers, we need to tackle these issues more aggressively.”
Despite his concerns, Boisseau praised Groupama’s first-hal result. “I am very encouraged by our performance so far. Prices in private motor have continued to rise and coupled with some strong underwriting action we have begun to reposition our account and take some significant steps in restoring profitability,” he said.
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