Insurers still smarting from BI claims - Towers Watson

Escalating bodily injury claims are continuing to hit UK motor insurers results, according to data analysis by actuarial firm Towers Watson.

Motor insurers paid out nearly £1.24 for every pound of premium they received in 2010, compared to £1.21 in 2009, based on figures submitted to the Financial Services Authority. This was despite the Confused.com/Towers Watson Car Insurance Price Index recording average price increases of 38% for new comprehensive policies during 2010.

Any chance of improving 2009's already disappointing industry figures were wiped out by some companies increasing reserves to guard against the worsening claims situation, Towers Watson said. Across the private motor sector, nearly 8% of premiums (over £500m) went towards setting cash aside to meet the cost of the UK's increasingly entrenched claims culture.

This reversed the trend of the last several years where firms have typically used prior-year reserve releases to improve their overall results, albeit that many companies remained in the red over that time.

The company added, however, that because of the clearer information that has also become available about prior-year claims, the 2010 figures may hide some positives from the actions already taken by insurers.

"By allocating claims to the year in which they happened, the true losses for private motor business in 2010 stand at around 16 pence in the pound compared to 28 pence in the pound for accidents in 2009,” said Towers Watson director Duncan Anderson in a statement. “Significant new business rate increases introduced in 2010 may have started to move underlying profitability in the right direction."