While UK motor insurers produced their best results for years during 2004, closer analysis shows they will find it hard to make profits in the future, a leading actuary has warned.
Analysis by EMB found that motor premium income rose 5% during 2004 to £8.9bn. But loss ratios fell slightly to 74%, while combined ratios improved by 0.9% to 101.3%. This means for every £100 of premium received, motor insurers paid out £101.30 in claims and expenses.
"UK motor insurers need to see rates rise by 5% a year just to keep up with claims," said Paul Moorshead of EMB. "Unless there's a return to boom investment conditions, the motor market as a whole will see red ink during 2005."
But some insurers posted results above the average. Notable success was seen in the results of Zurich, Direct Line, NFU, Brit and Provident - all of who booked operating ratios below 95%.
EMB's research was based on analysis of insurers' returns filed with the FSA.
' See EMB's in-depth analysis of the motor market in the Insurance Times Motor Supplement on 25 August