Motor insurance industry opinion divided on outlook, says report

More than 80% of Irish motor insurance companies said that their company decreased premiums in 2007, the majority by up to 10%, according to a survey for the Deloitte Motor Insurance Seminar.

Less than one in 10 respondents said premiums had increased.

Opinions in the motor insurance industry on the outlook for premiums in 2008 are mixed. More than 40% of respondents believed that premiums would increase by 0-10%. However, an additional 40% also predicted that premiums would decrease by 0-10%.

Analysis of the Insurance Statistical Review 2006 and returns made to the Financial Regulator show lower profitability for motor insurance companies in the 2006 accident year.

In addition, the research reveals that there is uncertainty among industry players with regards to profitability - the industry may have to accept that the higher profits experienced in previous years may now be a thing of the past.

"Initially, the Insurance Statistical Review appears to show reasonably healthy profits within the motor insurance industry, albeit they are not as high as previous years,” said Dick Tulloch, director of actuarial services at Deloitte.

“However, further analysis shows that motor insurance companies have once again released a significant amount of reserves. Therefore, the figures do not reflect the actual underwriting performance of the last accident year. This begs the question as to how many reserves are left to be released – and will companies be able to maintain profits in this way in coming years?”

The survey of motor insurance representatives attending the annual motor insurance seminar confirmed that there were mixed feelings regarding trading conditions in the motor insurance industry – while nearly 45% of respondents were more optimistic about conditions, over 35% were less optimistic than last year.

More than 70% of respondents believed the Personal Injuries Assessment Board (PIAB) was having a positive impact on compensation culture.

In addition, more than 70% were more optimistic about road safety, up from 56% last year. Similarly, more than 60% of respondents believed that the standard of driver behaviour has improved during the last 12 months.

“It’s clear from the mixed responses received in the survey that there is a substantial level of uncertainty within the industry itself as to future profitability,” said Glenn Gillard, partner, financial services, Deloitte.

“We believe that motor insurance companies will come under pressure to decrease premiums - as the general public become more sympathetic with road safety measures and the PIAB continues to have a positive impact on compensation culture, there will be very little justification for increased premiums.

“This will ultimately affect profitability – the recent years of exceptional profits may well be over.”

Deloitte’s annual Motor Insurance Seminar addresses the challenges and trends in the current motor insurance climate and is attended by representatives, of all levels, from motor insurance companies in Ireland, and also representatives from insurers in the UK.