Engelhardt says Admiral must stay cool amid some crazy competition
Admiral founder Henry Engelhardt today warns of kamikaze motor insurers squeezing competitors as they gun for unsustainable growth.
In the company’s 2014 results, where he cites a list of concerns, Engelhardt lists irrational competitors as his number one worry.
He said: “The number one worry in this hit parade of worries is always number one on my worry list: irrational competitors.
“These are competitors who either don’t mind if they lose lots of money (perhaps it’s even in their plans) or fool themselves in believing they won’t lose lots of money (but eventually they do) or don’t realise they are actually losing lots of money (and, again, eventually they do).
“So they act irrationally and buy business and in the world of car insurance irrational they may be, but they’re unlikely to pay the price for that irrationality for several years.
“So things can look jolly nice for them for quite a period of time (growth is good, right?). And the rest of the world is left with a choice: be rational in response, which means you lose a lot of business, or join the ranks of the irrational and sacrifice profits.”
‘Slalom through poor market bits’
He added: “That’s the position we found ourselves in, in the UK during 2014 as we tried to slalom our way through the poorest part of the UK cycle.
“Our growth in vehicles insured, achieved in the first half of the year, was a modest 4%. Our rates went up during the year across all customer segments.
“As our rates went up, our competitiveness declined. However, due to these rate increases, we feel we are in a better place starting 2015, and there are signs that the market is now raising rates which, given our superior expense ratio in particular, would give us the choice of continuing to raise rates or growing our customer count.”
However, Engelhardt said he was comforted by the fact that the UK chief executive was David Stevens, who he described as the best in the business.