The private motor market will not make a profit until 2010, Datamonitor has predicted.
The independent market analyst warned that motor insurers face a continued long period of unprofitability as rates fail to increase in line with claims inflation.
Andrew Birkett, financial services analyst, said because of market competition rates would only increase by 1% to 1. 5 % in 2006 with a "stronger" increase of 4.5% in 2007.
Datamonitor predicted that motor claims costs would increase by 5% each year with personal injury costs the main reason behind the rise.
According to the analyst the total claims bill facing motor insurers will reach £10.7bn by 2010, up from £8.3bn in 2005.
He said: "With that in mind, further rate increases in 2008 and 2009 will see insurers break into underwriting profit in 2010."
The last time the UK private motor market made a profit was 1994.
In December, professional services firm Deloitte warned that the motor market's profitability would tumble even further in 2006 because of relatively flat rates.