Insurers in 2015 spent approximately £102 in claims and expenses for each £100 of motor insurance premiums earned, according to research by business adviser Deloitte.
The firm said the resulting net combined ratio (NCR) of 102% - one percentage point higher than in 2014 - could rise to 104% in 2016, before falling back to 102% in 2017.
Motor insurance premiums in 2015 grew by 5% to £13.9bn equivalent to a £700m increase over the previous year, Deloitte said.
It said the figures showed the industry was still struggling to generate an underwriting profit.
Deloitte's insurance partner James Rakow said: "Large rate increases and changes to insurance premium tax have meant many consumers' pockets have suffered."
He cited data from the Association of British Insurers that showed the average cost of annual private car comprehensive insurance in 2015 stood at £403, a sum he predicted could rise to £440 this year.
"Drivers are going to continue shopping around for the best deal, so building brand loyalty will be more important than ever," Mr Rakow said.
"Insurers will need to work harder to tailor products and premiums to individual needs."
He said long-term expectations that self-driving 'autonomous' cars would become the norm meant "motor insurance is going to look very different in the future
Insurers will need to change how they think about risk, as our roads fill up with smarter cars over the coming decade."