Some motor insurers look like they're going to make a grab for market share by slashing rate increases, and that's worrying
No sooner had the ships emerged from the storm when some began to stray into dangerous waters again.
Jefferies & Co analyst James Shuck seems to believe that some players will look to grab back market share and, in the process, pull down rates from a previous year high of 30% increases down to single digits.
You have to wonder how insurers can afford to do this. Claims inflation is still in double-digit figures, so how can it make sense to stifle the rate hikes?
Fortune favours the brave?
There will be a divided market: some players will be desperate to maintain the 20% rate rises experienced so far this year, but will inevitably have to follow the second camp, which may look to chase volume through much lower increases.
If it transpires that Royal Bank of Scotland Insurance (RBSI) is one of those players slowing down on rate increases, then it will again raise eyebrows from rivals that a taxpayer-funded entity is distorting the market.
The accusation is a bit of chestnut, but you can understand the concern: an insurer crashes into huge losses, gets back on an even keel with a near billion pounds in reserve strengthening indirectly funded by the taxpayer, and as soon as it gets the chance again, chases growth by suppressing rate increases. Hardly fair, is it?
If RBSI does make this play, it also raises the question of how RBSI will achieve its super-ambitious target of 20% plus return on equity. Even the most adept of the Lloyd’s players would be proud of a 20% plus ROE, let alone a mass market motor insurer hungry for volume.
We don’t know if RBSI will be one of the players leading the charge back into single-digit territory. I’m just speculating, and it would be unfair to cast aspersions until we know otherwise. But be you can certain there’ll be some finger pointing behind closed doors if these rate increases dwindle.
Telematics comeback
It's interesting to see Aviva back in telematics, this time with fleet. Aviva was a pioneer of telematics, but dropped out in 2008, believing the project was not cost-effective.
With premiums rising so rapidly, the prospect of a personal lines re-entry could be on the cards. Is Aviva getting its feet wet again before jumping in with a mass market product for young drivers? Watch this space...
Saxon East is assistant editor, news.
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