Chief executive targets 20% rate rises and says company’s position ‘stronger than market average’
Fortis chief executive Barry Smith has vowed to crack down on loss-making motor business by targeting 20% rate rises.
Smith, speaking after Fortis’s first-quarter results, said the insurer’s low expense ratio and rating action would help bring motor back into profitability.
Earlier this year, Zurich chief executive Stephen Lewis announced a similar rate rise in personal motor.
Smith said: “We continue to increase rates, and we have some confidence about where we are seeing the strength of our position.
“On an annualised basis, we would certainly be in the 20% mark, in terms of rate increases.
“Our view is that it is important that we bring motor back to profitability. We expect our position to be considerably stronger than the market average.”
In a bright spot for the motor insurance industry, Smith, who is also chairman of the ABI motor committee, said he believed the industry-wide deluge in bodily injury claims had peaked.
“We’ve probably peaked at the rate of change, so if you look year-on-year, the percentage increase is probably flattening now quite considerably,” Smith said.
“In part, it’s because of industry action, in part individual companies, and this certainly applies to Fortis.”
He added that the industry would need to develop new ways to mitigate the rise in claims for bodily injury. This would include rating types of risk and also improving claims processes.
Fortis’s first-quarter premium increased 18.4% to £234.9m, compared with £198.4m in the same period last year. The insurer made a £1.8m net loss, although that included exceptional weather events in January, rising claims in motor, and the start-up costs in the joint venture with Tesco.
Premium income from Tesco will start flowing in at the end of the year, although the result will be categorised in a separate company.
Smith said he was “absolutely delighted” with the burgeoning commercial business, having seen premium grow 77% year-on-year.
He said: “We are resolute in our determination to offer an extended proposition to our brokers. Key to that will be width of products, service performance and continued investment in electronic trading.”
Fortis is thought to be looking at extending its capacity arrangements with UKGI, although Smith would not comment specifically on that point.
He said Fortis was open to pumping more capacity into managing general agencies (MGAs), but “only to a very limited degree”.
Smith said: “It is a tool that we have in our kitbag, but by no means is it the only tool.”
He added that boosting MGAs was one of the many strategies that could help Fortis to grow considerably over the next few years.