Experian survey finds a fall in direct motor rates in Q4 while Deloitte reports rate rise

Doubts were raised this week over the recovery of the motor market after direct motor rates fell in the last quarter of 2007, according to a survey by Experian.

But the findings were disputed by Deloitte which found that rates had increased during the period.

Online comprehensive motor insurance premiums fell by 0.3% in the fourth quarter, according to Experian’s latest motor insurance benchmark. This was the first quarter to see a fall in the average premium since 2005, the company said.

The year as a whole recorded a 6.3% increase in the average online price compared to 2006, according to Experian.

But analysis by Deloitte found that online comprehensive rates had increased by 2.7% during the final quarter of 2007. Over the year, online rates had increased by 2.3%.

The last year has seen insurers look to increase motor rates in a bid to offset claims inflation and return the market to profitability. The motor market has not made an underwriting profit since 1994.

Deloitte is predicting that the motor market will continue to make a loss in 2008.

Experian said that a month-on-month review of 2007 revealed that after an initial increase during the first half of the year, the final six months saw the average online comprehensive motor insurance premium become more stable, with the final three months recording a slight dip.

In comparison, broker comprehensive premiums increased by 1.7% in the final quarter of 2007, an increase of 1.1% overall in 2007, according to Experian.

Avis Easteal, managing director of Experian’s Insurance Services division, said: “It appears that the previously rising online premiums were finally levelling out in the second half of 2007. Broker prices may have remained low in order to compete with online prices, but this can only be sustained for so long and prices started to creep back up in 2007.

“However, the increase is slow and it is worth bearing in mind that consumers will be aware of the imminent price increases and will start shopping around for a cheaper quote. With the motor insurance industry being as fiercely competitive as it is, the focus on price will increase and it could affect the speed at which premiums increase.”

Catherine Barton, insurance partner at Deloitte, said Deloitte’s analysis was based on the cheapest premiums in a sample of 1,000 risks, whereas Experian looked at average premiums weighted by market share.

She added: “Our research showed that online comprehensive rates continued to rise in the fourth quarter.”