Article: Most insurance companies planning to increase car policy premiums

Seth Brundle

Most insurance companies planning to increase car policy premiums

20/10/2009 - 09:22:21

More than 85% of Irish motor insurance companies said that they expect their company to increase premiums in 2010.

According to Deloitte’s annual Motor Insurance Survey, 18% expected an increase of up to 5%, with 50% expecting increases of between 5% and 10% and 18% expecting an increase greater than 10%.

Analysis of the most recent insurance statistical review and returns made to the Financial Regulator show that overall the motor insurance companies showed a decrease in profitability with one of the major companies showing a loss.

This is the first time in five years that this has happened.

During the last number of years, there have been releases by companies from prior year’s reserves, now we are beginning to see the reverse happen, with companies strengthening past reserves as initial estimates of claims costs prove inadequate.

It is expected that the current year’s premium rates will have to continue to increase to bring profitability to current accident years.

In fact, respondents to the survey are more optimistic about trading conditions this year than at any point since the survey began in 2006.

his may also be explained by the fact that last year, less than 10% of companies expected to increase rates by over 10% in 2009. In reality, 38% actually did. Some 35% of respondents said that they increased rates by between 6-10% in 2009.

The impact of the recession has also led to a possible reduction in costs related to CPI and earnings. However, 76% of those surveyed felt that these downward pressures on claims costs could be markedly increased if speed cameras were widely introduced.

Other impacts of the recession identified by respondents included the increased likelihood of uninsured driving and fraudulent claims.

This year’s survey also shows that consumers’ buying patterns are changing, with 67% of respondents indicated that there had been a significant increase in the numbers of policies sold through their internet channel.

Commenting on the results of the survey, Dick Tulloch, director, actuarial services, Deloitte, said: “Motor insurance companies are relieved that they have at last been able to increase rates to levels that may halt the slide in profitability despite the continuing upward pressure on costs.

“This is especially important as many have found that recent years’ initial claims estimates are inadequate and might need to be strengthened. However, both the increases in rates and the impact of the recession may be reducing the size of the market further.

“This will put pressure on companies to align premium rates with increases in claims and expense costs.”

With a possible reduction in overall premium take, despite an increase in premium rates, the pressure on expense costs remains high.

Glenn Gillard, partner, financial services, Deloitte said: “While consumers may baulk at premium increases, it is very likely that insurance companies will pass on the rising cost of claims to customers.

“Motor insurance has been one of the most competitively priced financial products available in recent years leaving little room for companies to absorb additional costs.

“While companies need to continue to focus on internal costs, the greatest potential impact on price will be as a result of stricter enforcement of speeding and drink driving laws and a crack down on an emerging fraudulent claim culture.”

http://www.breakingnews.ie/text/business/eymhauididsn/

No mention of the fact that the downturn is affecting their bottom line! :rolleyes:

JHMEG

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