Insurance Premium Hikes Subside

Suggestions of a price war between the UK's major motor insurers are premature, according to a new report from independent market analyst Datamonitor. The report suggests that while the majority of insurers are still covering rising claims costs with increased premiums, the 'sky-high' rises of 2000 and 2001 will not be repeated.

UK Motor Insurance 2004 gives in-depth analysis of market drivers, consumption data and competitor dynamics, and makes market forecasts up to and including 2008. The report includes data from primary interviews with senior claims and underwriting professionals.

The top ten players have strengthened their stranglehold on the motor insurance market, accounting for almost 64% of the market in 2002. This growth is in spite of the challenge from new entrants and has come at the expense of smaller players whose combined market share was slashed by almost 5% between 2001 and 2002.

Quotes in 2001 averaged around 17% more expensive than in 2000, but this year's average increase, with the established insurers facing stiff competition from banks and supermarkets among others, is expected to be around 6%. According to James Greenwell, Datamonitor Financial Services analyst and report author, profitability levels have improved, but 'large insurers have no need to get involved in a damaging price war and are looking to push through controlled premium increases to cover claims costs'.

Datamonitor expects motor insurance firms, previously hampered by escalating claims costs, to return to underwriting profitability in 2004 and on into 2005 as the market consolidates. It estimates total premium income at present at around £12.6 billion p.a.

In conclusion, Greenwell suggests that with underwriting profitability under intense scrutiny from capital providers and shareholders, 'the next price war is likely to be delayed for a while as insurers become more responsible and disciplined. When it does occur, it will be less severe and less prolonged due to the changing competitive dynamics at work in this turbulent market'.

More information is available via www.datamonitor.com

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas, 2024- by Nick Thomas, unless otherwise stated.

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