The majority of UK non-life companies reported improved underwriting results in 2017, driven by improved loss ratios in motor insurance and slightly lower expense ratios as insurers continued to implement cost-control initiatives, reads the latest Fitch report.
The main findings of the report with regard to the motor insurance business in the UK are:
- Motor insurers benefitted from significant rate rises in 2017, with the average motor premium increasing by 9% compared with 2016. This significant premium rate increase was driven by the reduction in the Ogden discount rate in February 2017 that resulted in substantially higher costs for large bodily injury claims. The Ogden discount rate change caused a number of insurers to strengthen reserves in 2016, negatively affecting results, while in 2017 loss ratios benefitted from more normal levels of reserve releases.
- The timing of the implementation of further Ogden reform is unclear, and premiums could rise further if it is delayed into 2019. Insurers are likely to face further increases in reinsurance costs as reinsurers look to raise prices to reflect rising large bodily injury claims incurred. Insurers also face higher motor damage claims costs due to the weakness of the pound and the increasing complexity of car repairs. Whiplash reforms, aimed at reducing fraudulent claims, are expected to come into force in April 2019. While they could lead to some downward pricing pressure, we expect insurers to remain cautious in their underwriting approach. We expect premiums to remain broadly flat during 2018 unless the Ogden discount rate is revised earlier than we currently expect.
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