Motor insurers suffer from web price cutters.
Price comparison sites have continued to drive down profits in the motor market, according to the latest market analysis by actuarial practice EMB, published exclusively in this week’s Motor Times.
The average premium for a comprehensive motor policy was £365 in 2007, compared with £378 in 2003.
The report highlights how price comparison sites have prevented insurers from raising prices. More than 10% of motor insurance premiums are purchased through such sites, also known as aggregators.
Motor insurers released more than £1bn from their reserves in 2007, propping up the market but disguising the fact that it is no longer profitable. Some insurers were subsidising their motor account by 30%, leaving the current level of reserving at its lowest mark since 2001. EMB estimated that reserves could start to run out in two years, leaving insurers with no choice but to hike up prices.
EMB senior consultant Naeem Ali said: “The UK motor market is about to go through the biggest upheaval since direct insurance burst onto the scene in the 1980s, thanks to internet comparison sites which have intensified the already high levels of competition. There’s bound to be fall out affecting the companies that provide the comparison sites as well as the insurers themselves. In the short run, the motoring public is benefiting from this competition, but the current position cannot continue indefinitely. Price rises are inevitable.”
The report also contained some more welcome news for insurers, with the suggestion that the rising cost of petrol would cut the number of drivers, and consequently accidents, on the road.