Towers Watson has described UK motor insurance as “a seat-of-the-pants experience” in its annual UK Motor Insurance Industry Report.
Despite Prudential Regulation Authority (PRA)-registered insurers having recorded their first aggregate underwriting profit for 19 years in 2013 after reserve releases were taken into account, the company said that ensuing events had given little cause for complacency.
Karl Murphy, UK Property & Casualty Insurance Leader at Towers Watson, commented: “To put the 2013 result into context, if you took reserve releases out of the equation, UK motor insurers were still nearly 10 percentage points above underwriting breakeven. Subsequently, the continued drop in average new business prices during 2014, even allowing for the very small average premium increase seen in the third quarter, has already been widely called into question. But this is just one aspect of a bubbling cauldron of issues ready to scald unwary UK motor insurers.”
In the short- to medium-term, Towers Watson pointed to the continuing business volatility and uncertainty created by both recent and anticipated legislative and regulatory changes. In particular, it noted that a stable claims picture had yet to emerge in the wake of the measures introduced in the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO), and the onus this had placed on companies to enhance tracking of their own specific claims trends and pricing sophistication.
Looking further ahead, this year’s edition of the report investigates the potential impact – and opportunities – of a number of major developments affecting the industry. Big data, telematics, and driverless cars all had the potential to change the shape of motor insurance in the future according to Towers Watson, raising the question of how companies foster and manage innovation.
Karl Murphy said: “The majority of UK motor insurers are doing a laudable job in managing performance in what has been for several years now a fast-changing and unpredictable market. In our opinion, there is little hope of a smoother ride for some time to come.”
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