A double-digit hike in motor rates has been predicted for next year, but will it be enough to bring profitability back to the sector?

AXA UK chief executive Paul Evans had some good news for motor insurers when he predicted that motor rates will increase by double digits next year.
 
Will this be enough to restore the sector to profitability? Even Evans was unsure. He tempered his bold statement by saying that personal injury claims could still leave insurers in the red.
 
If claims inflation is taken out of the equation, then the average driver’s premium is still 26% below what they paid in 2000, according to ABI director-general Otto Thoresen.
 
However, next year will see some unprecedented changes in how the industry tackles fraud, a massive component of claims inflation.
 
The new insurer-funded anti-fraud police body will launch in 2012, and it is hungry for some high-profile prosecutions to send out the message that insurance scams aren’t the easy option for fraudsters any more. Many fraudulent claimants see motor insurance as the path of least resistance, but could easily be scared away.
 
The question of whether or not profitability will return to motor is still up in the air, but insurers must be more hopeful than they were this time last year.
 
The cost of goodwill

Footballer Darren Bent’s victory over Allianz in the long-running credit hire dispute is a stark reminder of the power credit hire companies have over the claims process and the challenge this power poses to the entire insurance industry.
 
On the one hand, credit hire companies are great for giving the no-fault driver the VIP treatment and leaving them with a good impression of the industry. However, that goodwill soon evaporates if the insurer on the receiving end refuses to pay, leaving the no-fault driver to pick up the tab for the car hire.
 
Such claims put the insurers of at-fault drivers in a very difficult position. It could be argued that Allianz would have been better to pay Bent his £63,000 in the first place. While the insurer knocked £7,000 off the full amount, it had to expend money and resources on the court battle, and arguably looked churlish for dragging a faultless driver through the courts. But, equally, insurers cannot afford to be soft touches on claims, and should be tough in the face of claims they feel have been unnecessarily inflated.
 
Confusion played a big part in this case. If insurers and consumers could agree on what they consider an appropriate hire rate and come up with a standard way of measuring it, such disputes could be a thing of the past.  

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