The motor market will lose money for several more years despite soaring premiums, finds Standard & Poor's.
Gross premiums soared 10% to £9.32bn and there was a 4% point improvement in its overall loss ratio to 95%, the rating agency's report finds.
But a 10% rise in claims frequency tempered the result making 1999 the highest year for claims frequency since 1994. Claims represented 17.5% of total policies issued.
“If the market continues to follow current trends, it will be several years before many motor insurers achieve combined ratios at the break-even 100% level,” said David Laxton, who co-wrote the report.
The report finds that, despite a steady increase in premiums since 1996, the motor insurance industry's performance was in decline until 1999, with incurred loss ratios rising 25.9% between 1994 and 1998.
Laxton adds: “Nevertheless, since 1995, the volume of motor business written has risen 11%, with the top ten players in 1999 consistently holding the lion's share of the market.”
He warns that the market is likely to become more competitive because of the internet-driven providers such as Egg and Virgin.
The report shows that the average combined ratio among insurers for 1999 was 118%, although most leading players showed combined ratios that were average or above-average.