Price increases slow to a halt

The motor insurance industry is holding its breath as the market teeters on the brink of another price war.

Highway Insurance underwriting director Chris Hill said prices were becoming increasingly competitive, but the industry needed to keep the cost base steady.

"I desperately hope prices will not drop now," he said.

Hill confirmed that the price increase had slowed down so much it had virtually stopped. "Any price increase would be selective and not dramatic," he said.

Hill said he thought the term price war was "too dramatic", but said underwriters were selectively dropping rates and discounting in certain profitable segments and moving prices up where they needed to.

Primary Group chief executive Mike King said the motor insurance market had now reached the top of its cycle.

"The motor market went hard, which means the prices went in the underwriter's favour early and it's now reached the top of the cycle, " he said.

"People are now talking about coming back off the cycle. People don't pay enough in the country for the risk of motor insurance and unfortunately that risk is getting worse," he said.

Broker Ian Mantel of Manor Insurance said quotes he had been offered this year were cheaper than those offered for August last year.

"We are definitely at the peak of the cycle and could go into freefall," he said.

He expressed concern at the prospect of drastic price reductions, considering the motor insurance market's history of instability.