Motor insurers’ combined operating ratio (COR) was 102% in 2015 according to figures released by Deloitte.
The firm forecasts the COR could rise to 104% in 2016 before returning to 102% in 2017.
Motor insurance premiums in 2015 grew by 5% to £13.9bn in 2015.
But Deloitte said while premiums went up primarily on personal lines, the COR figures indicated the industry was still struggling to generate an underwriting profit.
Deloitte insurance partner James Rakow said drivers were going to continue shopping around for the best deal, so building brand loyalty would be “more important than ever”.
He added: “Insurers will need to work harder to tailor products and premiums to individual needs.
“Large rate increases and changes to insurance premium tax have meant many consumers’ pockets have suffered. Figures from the ABI have shown the average cost of annual private car comprehensive insurance premium in 2015 stood at £403. Based on our analysis, this could potentially reach £440 in 2016.
“There are other broader trends that could affect insurers in the coming years. We’re seeing more cars being registered in the UK, but car usage is declining with more journeys by public transport. The proportion of older drivers is also rising.
“Combined with the long-term expectations for autonomous cars to become the norm, motor insurance is going to look very different in the future. Insurers will need to change how they think about risk, as our roads fill up with smarter cars over the coming decade.”