Research shows although road usage has fallen to its lowest level since 2005, the frequency of accidents with a third party injury claim has gone up by 6% in the last two years. Data released by Institute and Faculty of Actuaries show one in four third party motor claims in Britain involves bodily injury.
The private motor insurers paid £1.24 for each pound of premium earned due to the cumulative effect of surging claims, said Towers Watson. This compared with £1.21 paid to a pound in 2009 paid by insurers, the firm pointed out.
Towers Watson said the losses continued despite a 38% hike in its car insurance price index, compiled in collaboration with Confused.com, for new comprehensive policies during 2010.
The industry paid nearly 8% of premiums (£500 million) to settle the cost of claims during the year. This reversed the trend of previous years hen firms had typically released reserves from previous years to improve their overall financial performance, irrespective of the fact that many companies reported losses over that time.
However, the professional services firm also found out that 2010 numbers may hide some corrective measures initiated by the industry since more information is now available about previous years’ claims.
“By allocating claims to the year in which they happened, the true losses for private motor business in 2010 stand at around 16p in the pound compared to 28p in the pound for accidents in 2009. Significant new business rate increases introduced in 2010 may have started to move underlying profitability in the right direction”, said Duncan Anderson, director of Towers Watson.
“The headline figures are still however clearly bad, and private motor insurers, with a few exceptions, still have some way to go to return to profitability”, he warned.
“While there are early signs that the actions taken so far are having an effect, it will remain important that recent emerging claims patterns, and the reasons for them, are tackled on multiple fronts. This includes using customer analytics techniques to enhance underwriting and combat fraud, as well as appropriately reflecting changing bodily injury experience in premium rating structures”, he observed.