What a year it has been for motor insurers. Not only have they had to contend with consumer outrage about reports that motor premiums are set to increase, but they also have to deal with the effects of the landmark Callery vs Gray Court of Appeal decision and the drop in the Odgen discount rate to 2.5% - both expected to lead to further price hikes.

The number of motor vehicles registered in the UK has continued to grow substantially but, despite a hardening of rates, market analyst Datamonitor doesn't expect to see a return to profitability in the sector until 2002.

Huge underwriting losses stemming from half a decade of price competition, coupled with escalating costs of motor claims have had a real impact on the market. But insurers are now taking a hard stance
on underwriting and say any rises will just stabilise rates.

Other issues likely to have an effect on the motor sector in the coming year are NHS recoveries, after the event premiums, repair vehicle costs, the internet and reinsurance availability for unlimited cover following the Selby crash.

Yet as one major insurer points out, one of the greatest threats will be customer expectations - those insurers that don't make huge efforts to meet changing consumer demands will certainly lose out in the future.

Alison Boyle
Managing editor