General insurance MD Rob Townend says Aviva will not go chasing the personal motor market for short-term gain

Aviva are expecting their motor profits to recover next year in response to an anticipated change in the Ogden rate.

Rob Townend, managing director of UK general insurance, said despite the delay in how whiplash reforms will be implemented, he was still expecting legislation in the Civil Liability Bill around changes to the Ogden rate to get passed by Q1 of 2019.

And on top of this he said pricing volatility should start to ease in the next year.

Half yearly profits for Aviva’s UK general insurance business were down 9% on 2017. While much of this was due to the £60m cost of adverse weather, personal motor revenues were also down 4%.

Commercial revenues performed more strongly – up 3% on last year to £864m.

Townend said personal motor would continue to be an important sector for Aviva moving forward, but that until the market returned to growth, the insurer would not go chasing the market.

He said: “Private motor is still the strongest cycle that we tend to observe in the market.

“When the market is hard revenues grow, when the market softens the cost of the vehicle goes down.

“At that point the only way you can maintain your volume is increasing your share, which isn’t necessarily a good long-term profit play to grow your share in a falling market.

“At the moment we’re just showing some discipline and not chasing the market down.”

Diverse portfolios

Despite the 9% fall in profits, the combined operating ratio (COR) only dropped from 93.2% to 94.3%.

Phil Bayles, managing director of UK intermediaries at Aviva, said the relatively small drop in COR was as a result of a deliberate diversification of the business and the strong commercial lines showing.

He said: “The underlying business is better on that basis if you normalise it for weather. If you’ve been reading the commentary every single insurer has commented on the weather, but we’ve had only a relatively minor hit on our COR.

“Because we’re strong in multiple channels we have the ability to flex our volumes more readily than a lot of other people.

“We’ve had a few years where the personal lines market has been exceptionally good and its lead the growth of the business.

“This year there’s clearly some challenges around market conditions in motor and we’ve been about to flex up our commercial lines business very strongly, particularly in the non-motor classes.

“We have a resilient model because we are multi-channel, multi product, and that’s what has come through in our results.”