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The Actuary The magazine of the Institute & Faculty of Actuaries

Motor insurance industry ‘must increase profitability’

Despite improved financial results last year, the UK motor insurance industry needs to do more to improve its profitability, Deloitte said yesterday.


The consultant published figures showing that insurers posted a net combined ratio of 106% in 2011. This means the combined cost of claims and expenses was £106 for every £100 of net earned premium. Of this, the market claim ratio – the total claim amount incurred during the year as a percentage of the net earned premium – was 79%, and the market expense ratio – the cost of general expenses and commissions during the year as a percentage of the earned premium – was 27%.

This represented a ‘significant improvement’ from the previous year, when the net combined ratio was 120%.

James Rakow, insurance partner at Deloitte, said that despite this improvement, underwriting losses for the UK motor insurance industry as a whole were close to £600m last year.

But, with total premiums at £14bn a year, he said the market was still attractive for insurers who were able to gain and retain profitable customers or sell add-ons to basic motor cover.

He added: ‘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.’

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