Car Insurers Debate Over Future Profits

After 14 years of unprofitable business, an independent report reveals the possibility of UK car insurance companies making a profit in 2009, according to the Telegraph. Despite motor insurance premiums kept under pressure due to fierce competition, providers are feeling optimistic about the future profitability in the UK market.

The UK's largest car insurer, the Royal Bank of Scotland and others feel the tide is turning. However, rivals like Admiral warn such profits may be slow to come about as price comparison sites eat away at insurers' profits.

Datamonitor , an independent market analyst, reported by 2009 they expect to see £30m of underwriting profits for UK car insurers. The AA insurance, on the other hand, say they see no signs of claim costs reducing, which is a major factor if the industry is to meet this optimistic target. The AA believes they would have to raise premiums by 20 per cent over the next 2 years to reach a profit.

Last year, according to the AA, £112 was paid out in claims compared to £100 coming in for premiums.

The Chief Executive of AA Insurance said, "Online buying means that buyers are much more likely to shop around for car insurance and buy on price. That is keeping premium rises in check.

"So far this year we have not seen industry premiums rise by anything like the amount that would make the industry profitable. It remains a very volatile and competitive market, and we don't see that changing in the immediate future."

Datamonitor’s report is much more optimistic for 2009 however, curiously they then forecast this profit honeymoon to return once again to a loss in 2010 due to increased competition. Andrew Haslip, Datamonitor's financial services analyst, says when consumers shop for car insurance they make their decision largely based on price, especially those who compare online.

Published on March 13, 2008