Motor insurers again made big losses in 1999 and the market is not expected to return to the black until next year, according to an analysis of returns to the Financial Services Authority by English Matthews Brockman (EMB).

Underwriting losses last year topped £1.3bn, a slight improvement on 1998's loss of £1.5bn, but higher than market expectations.

Andy Teale, a consultant at general insurance actuaries EMB, said: “Rates have been going up strongly, but not strongly enough.”

Premium rates have been rising throughout this year, with the trend set to continue for the foreseeable future. A return to profit is not expected until next year.

“Rates still need to go up another 15%,” said Mike Brockman, a partner at EMB. The primary underlying driver for the loss is the cost of paying out for personal injury claims.

“While accident rates are falling, the cost of paying injury claims is rising rapidly,” said Brockman. He blamed the “free and easy access that is now available to legal services for personal injury accidents”.

The slight improvement in the underwriting result came from a reductions in the expense ratio from 30.3% in 1998 to 29.1% in 1999 and a fall in the claims ratio from 92.3% in 1998 to 91.1% in 1999.

The overall market result hides the disparities in the performance of different companies.

The best performers out of the top 20 insurers were Provident, Fortis, NIG, Norwich Union and Direct Line. All these performed more than ten percentage points better than the market average.

Teale said a number of factors could lead to companies outperforming the market, including the quality of management and the ability to target cover.