Zurich takes the plunge on rates

14/01/2010

Along with things like gnomes and unmarked bank accounts, Zurich is virtually a byword for financial probity. So perhaps it’s no surprise that the insurer of that name has led the way in doing what most personal lines motor insurers have long been saying they could not afford not to do but haven’t actually done much: hiking up their rates.

“You do it.” “No, you do it.” “No you.” Insurers have been saying for longer than anyone can be bothered to remember. Now finally, one has shown steely resolve by insisting on a 20% increase across the board.

The increase is unavoidable, Zurich told its broker partners, due to a massive rise in third party claimant costs, PI claims in particular, driven by claims farming and referral fees.

Steve Lewis, chief executive, UK general insurance, said: “We have seen a 30% increase in bodily injury frequency with a worsening trend throughout 2009. This, combined with high inflation, has resulted in a 50% increase in the cost of covering bodily injury losses in the last few years.” If the trend continues, he warned, even 20% may not be enough.

“Indications that the PL motor market is running at a combined operating ratio of over 120%,” he said, “mean the pressure is on all insurers to bring about an improvement in the market performance.”

“So come on,” he didn’t say. “Last one in’s a sissy.”


05/11/2009

Most people find the process of getting one motor insurance quote quite tedious enough. But not the AA; they’ve just got a thousand of them from no fewer than 90 different “providers.” The irony is they’re not planning to take up a single one of them. Talk about time wasters!

And would you believe they go through this whole bizarre ritual four times a year? This time round, however, they’ve actually discovered something mildly interesting. Since their last night of a thousand quotes, three months back, it seems average premiums have gone up 5.6%.

The last quarter’s increase, AA stats men claim, is the steepest three-month rise since time itself began – or at least since they started compiling their giant quote basket 15 years ago.

According to their press release, average fully comp renewal premiums are up at £821.00. But people who shop around can get away with an average £522.

Hardest hit by these increases are younger drivers whose TPFT premiums increased by almost 10% in the last quarter.

Why are motor insurers ramping up rates? According to AA man Douglas Simon, it’s because of “rising costs, depleted reserves and lower investment income,” with the slump-fuelled fraud-fest and increased personal injury claims also playing a part.

Is anybody making a profit yet? Someone else’s survey shall doubtless show us soon.


26/08/2009

A curse and a pox on yon scurvy recession, sputtered salt-encrusted motor insurer Admiral this week. If it weren’t for a flood of claims shipped amidst the roiling of the current economic storm, the Admiral wouldn’t have had to hoist premium rates five and one half percentage points to make an honest living.

Unfurling its latest results for the first half of the year, the old sea dog revealed a 5% rise in profits swelled by rising car insurance premiums – which, in the wake of this year’s 5.5% rise, are now 8% higher than a year ago. Time to break out the grog, then.

Scanning the seas ahead, the Admiral spied a further 6% rates increase over the coming half year. The increased costs of sailing with the Admiral don’t seem to be harming recruitment though. Without any recourse to press-ganging, an additional 17% have come aboard, boosting turnover to £540m.

A report from consulting firm Watson Wyatt, meanwhile, suggests the UK private motor insurance industry’s underwriting loss in 2008 was more than double that reported to the FSA.

UK insurance companies reported an underwriting loss of only £493m last year. WW reckon actual losses were far worse but were disguised using past years’ reserves.

Senior consultant Ryan Warren said: “These insurers have tried to bolster their results by releasing money from their reserves, therefore disguising the actual underlying performance of the business. By removing these reserves and allocating them to the year they actually come from, we were able to identify and better understand the true underlying profitability of the market.”

WW conclude that the 2008 result was slightly better than the underwriting loss of over £1.1bn in 2007 and represented a break in a continuous trend of losses since 2004 – the only profitable year in the past decade, when the market made a profit of £77m.

RW said slightly improved results last year were due to a reduction in the number of claims, a slight increase in rates, and the restructuring of reinsurance programmes leading to savings in reinsurance spend. However many still struggled to break even last year.”

The firm predicted a return to profitability next year, with projected underwriting losses falling from the current 15% of earned premiums to 6%, with a 2% per annum return on capital after allowing for investment returns.


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