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Insurers in 2015 spent approximately £102 in claims and expenses for each £100 of premium earned;
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NCR could increase to 104% in 2016, before improving to 102% in 2017.
While premiums have gone up primarily on personal lines, Deloitte’s figures indicate the industry is still struggling to generate an underwriting profit. The headline net combined ratio of 102% (2014: 101%) means that £102 is spent on claims and expenses for each £100 of premiums earned. Deloitte forecasts the net combined ratio could spike to 104% in 2016 before returning to 102% in 2017.
James Rakow, insurance partner at Deloitte, said: “Large rate increases and changes to insurance premium tax have meant many consumers’ pockets have suffered. Figures from the ABI have shown the average cost of annual private car comprehensive insurance premium in 2015 stood at £403. Based on our analysis, this could potentially reach £440 in 2016. Drivers are going to continue shopping around for the best deal, so building brand loyalty will be more important than ever. Insurers will need to work harder to tailor products and premiums to individual needs.
“There are other broader trends that could affect insurers in the coming years. We’re seeing more cars being registered in the UK, but car usage is declining with more journeys by public transport. As well the proportion of older drivers is rising. Combined with the long-term expectations for autonomous cars to become the norm, motor insurance is going to look very different in the future. Insurers will need to change how they think about risk, as our roads fill up with smarter cars over the coming decade.”
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