The UK private motor market will fall further into the red in 2007, despite sustained rate increases during the year, according to Deloitte.
The professional services firm said in a report that the motor market’s underlying loss would drop further from its 2006 performance before improving slightly in 2008, although still making a loss in that year.
Deloitte said that aggre-gators would play a key role in determining whether 2009 would be a profitable year.
In 2006 the UK motor market, excluding Lloyd’s, produced an underlying net operating ratio (NOR) of 111.1%. This was bolstered by a 9.7% reserve release, improving the ratio to 101.4%.
Deloitte, which analysed the FSA returns of UK motor insurers, predicted the NOR would deteriorate slightly in 2007 to 111.6% before improving marginally to 111.1% in 2008.
Catherine Barton, insurance partner at Deloitte, said rate increases in 2008 were vital if the market were to continue to edge closer towards profitability.
She added that aggregators played an important role in determining rate movements.
“The question is what will happen in relation to dis-tribution and aggregators – will aggregators act to keep rates low or will people be sensible and put rates up?”
She said rate movement in 2008, particularly in the second half of the year, would have a significant impact on the market’s profitability in 2009.
Half of the 2009 premiums are written by the end of 2008 – an average 12% being written in the first half of 2008, and 38% on average written in the second half of the year.
Barton said: “Rates on 1 January 2008 are important, but more so are rates in the second half of 2008.”
It was too early to say at this stage what 2009’s profitability would be, she added.
The motor market has not made an underwriting profit since 1994.