Market sees 30% increase in annual cost of fraud
The UK personal motor market will remain unprofitable until 2015 due to a 30% annual increase in the cost of fraudulent claims and increased competition, according to a new survey of insurers by Towers Watson.
The consultancy firm pointed out that third-party bodily injury claims have almost doubled in ten years as a result of an increasing number of claimants per claim and a more aggressive claims management industry, despite a fall in the number of accidents over the same period.
Elsewhere, FSA returns show an industry loss ratio of 100% and a combined ratio in excess of 120% for 2009 driven by an estimated 30,000 fraudulent accident claims for the same year.
Head of Towers Watson’s pricing and product management practice across EMEA Ryan Warren said: “Ten years ago, the best insurers differentiated themselves from the worst on the strength of sophisticated pricing systems and underwriting to spot profitable niches. Fraudulent crash-for-cash claims continue to spiral out of control, highlighting the critical role claims management has to play in today’s marketplace.”
Undetected general insurance fraud now totals £1.9 billion per annum, while AA figures show the average car insurance premium jumped this year to above £1000 for the first time, representing a 19% increase on the year before.
According to Towers Watson, this adds approximately 5 points to the industry, all-lines, combined ratio.
Towers Watson senior consultant George Maher said: “Our research indicates that just over £80 per policy now goes to pay for fraudulent claims - both hard and soft fraud. As a result, in many cases most of the premium increase - and in some cases all - is going to pay for fraudulent claims. An added societal consequence is the increasing number of people becoming uninsurable, notably younger drivers who are the hardest hit.”
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