UK motor insurers have seen greatly improved financial results in 2011 but need to do more to improve profitability, according to Deloitte, the business advisory firm.
Figures presented at Deloitte’s 22nd Annual Motor Insurance Seminar show that, despite seeing the biggest single-year improvement in profitability, the industry is still collectively declaring an underwriting loss.
Insurers in 2011 posted a net combined ratio of 106%, which means the combined cost of claims and expenses was £106 for every £100 of net earned premium. This is a significant improvement on 2010 when the net combined ratio was 120%. The market claim ratio was 79% and the market expense ratio was 27%.
James Rakow, insurance partner at Deloitte, said:
“At an industry level, the underwriting losses were close to £600 million in 2011 despite improvements in profitability over the year. Investment returns will have helped to alleviate underwriting losses. With total premiums now reaching £14 billion a year, the motor insurance market is still attractive for insurers who are successful at attracting and retaining profitable customers or selling add-ons to basic motor cover.
“The motor insurance market achieved a 10% increase in gross written premiums between 2010 and 2011. This was not enough to return the market to underwriting profitability and many consumers are expected to face further increases in 2012 as insurers seek to improve their results.
“We expect improved results to be delivered by motor insurers in 2012 and we could see an underwriting profit for the industry. The last time this was seen was in 1994.”
