Briefing: Why UK motor prices will rise amid these reinsurance hike figures

UK motor prices are heading for some steep prices rises in the first half of this year. 

That is my prediction following the huge reinsurance hike figures - between 30% and 106% - being quoted.

Speaking to a trusted contact yesterday, here are the figures he gave me, having been notified by his reinsurance broker, for average market reinsruance prices increases on excess of loss reinsurance.

Elsewhere, the most conservative figures being talked about are in the 30% to 40% margins on lower limits.

One reinsurance buyer at a UK motor insurer told me that for ’well run books the average was 30%’, a price rise not far off what Esure took. 

So when will the primary price rises kick in? They are likely to kick in more aggressively in the second quarter of the year, with many predicting at least a 5% rise on the back of these post-Ogden reinsurance hikes. 

Speaking to the AA and looking at their historic data, the first quarter is always competitive amid a heightened period of cars changing hands. 

When the market is gunning for price rises, the first quarter tends to show a levelling off in rates and then it’s the second quarter when the rises really kick in. 

Political implications 

It’s always a dangerous game predicting the market, but it’s difficult to see how insurers can avoid price rises in the primary market upon absorbing these reinsurance costs. 

Prices rises would have wider implications politically. The government claims the Civil Liability Bill will help reduce prices.

Insurers have jumped on the bandwagon saying they will pass on the savings. 

But the impact of Ogden and the IPT hikes has wiped out those benefits and we are now heading for price increases. 

Overall, it looks like 2018 is going to be another year of drama with the access to justice lobby crying foul play, increased pressure on government/regulators to sort out the dual pricing problem and privately, motor insurance bosses wiping their sweaty brows with relief  that there is at least some price inflation on the way.