The latest report on private motor rate movements is encouraging
The latest in a serious of reports on rate movements in the precariously poised private motor market was published last week.
The AA’s British Premium Index showed car insurance premiums continued to rise in the fourth quarter of 2007, increasing by 2.4% during the period.
According to the AA, motor premiums are now at their highest level since 1994.
The AA’s findings come hot on heals of two other surveys, one by Deloitte the other by Experian.
Experian’s study painted a slightly gloomy picture for the motor market, reporting that online comprehensive motor insurance premiums fell by 0.3% in the fourth quarter.
This, it said, was the first quarter to see a fall in the average premium since 2005 – not a good sign when motor insurers are struggling to raise premiums in order to drag the market back into profitability.
However, Experian added that the year as a whole recorded a 6.3% increase in the average online price compared to 2006.
In contrast, Deloitte reported that online comprehensive rates had increased by 2.7% during the final quarter of 2007, amounting to an increase of 2.3% over the year.
Overall, the surveys point to the continued recovery of the motor market. Insurers have been looking to raise rates over the last year in order to return the market to profitability – the sector has not made an underwriting profit since 1994.
The problem for insurers is claims inflation. Personal injury claims costs are rising at around 10% a year, while the cost of repairing accident damage is rising by around 5%.
Significant rate increases are needed each year just to break even.
Deloitte predicts that 2007 and 2008 will continue to be unprofitable for motor insurers. Will the same fate befall 2009? What happens to rates this year will be crucial.
