Highway Insurance chief executive Andrew Gibson has warned that market deals with brokers and premium discounts need to be reined in if the motor market is to achieve profitability.

The motor specialist this week unveiled its interim results which highlighted challenging market conditions.

The company saw pre-tax profits rise to £11.8m in the first half of the year up 57% on the same period last year due to strong investment returns. But its operating ratio deteriorated to 100.9% from 98.1%.

Gibson said broker deals and discounts had held back premium increases in the first half of the year. He said: “We increased our private car premium screen rates by an average 4% in the first half year. However after broker deals and discounts, our achieved new business premium rate increase was flat in the first quarter rising to 2% in the second quarter of 2007.

“There is now stronger evidence of a rate recovery in standard products, as well as signs that market deals and discounts, which serve to undermine standard rates, are being reined in.

“We have achieved further premium rate increases of almost 4% in July and August and will seek to maintain this trend at the expense of volume where necessary, for the remainder of 2007.”

The motor market made an underwriting loss of 11% for the 2006 accident year.

Gibson also blamed sloppy under-writing, driven heavily by the growing emergence of aggregators, for the current state of the motor market.

“Companies are writing to volume and not profit, and aggregators mean people are pricing by comparison and not market standards.”

But he welcomed the emergence of aggregators saying that the majority of business for Highway’s broking operation, Hero, came from price comparison sites.

But insurers needed to start pricing properly and responsibly.

“We as an industry need to maintain nerve and stop playing chicken.”

Admiral Group chief operating officer David Stevens said that the growth of price comparison sites meant that aggressive pricing deals offered by insurers to brokers would have a wide impact.

He said that there were signs that fewer such deals were taking place.

“Insurers in question may have reached growth targets or found that the profitability impact of selling at such a discounted rate is too painful.”

Meanwhile, Highway said it had prevented over £11m in potentially fraudulent motor claims in the past five years.

It said it had screened nearly 19,000 motor claims cases since 2002 using DigiLogs’s Advanced Validation Solution (AVS).

AVS uses voice risk analysis technology, and cognitive interviewing skills to help assess risk.

Highway to enter household market

Highway Insurance Holdings is to enter the home insurance market early next year, having put plans to enter the market on hold after an unsuccessful pilot project, earlier this year.
A second pilot project proved to be a success and a product will be launched at the beginning of 2008.
Chief executive Andrew Gibson said: “We have not been exposed to the flood losses in 2007, so we thought it was a good time to enter the market.”