The motor car insurance market in the UK will not turn any profits until at least five years from now due to a 30 per cent increase in operating costs related to insurance fraud, Towers Watson says.
The professional services firmrecently commented the prevalence of cash-for-cash claims have been growing at an alarming rate. Additionally the firm stated that due to an increase in the number of people involved per claim, bodily injury claims from third parties have nearly doubled over the course of the last decade. Towers Watson also cited the increasing aggressiveness of the claims management industry is also to blame for rising costs. All of these factors have made it much more expensive for car insurance groups to function in the current economic landscape.
Additionally returns from the Financial Services Authority have shown that loss ratios for car insurance companies have been quite high; for 2009, the loss ratio stood at 100 per cent, while the combined ratio was more than 120 per cent.
George Maher, senior consultant for Towers Watson, commented on the dire statistical news by stating that more than £80 of even the cheapest car insurance quote goes to offset the cost of fraud.
Mr Maher added that while the costs of both hard and soft fraud have been built into even discount car insurance, as a consequence the number of people who have become uninsurable has increased dramatically. Younger drivers, he noted have been hit the hardest in this new trend.
Towers Watson was quick to point out that not every insurer is in the same sinking boat when it comes to profitability, however. The firm stated that many companies that have managed their claims processes in a proactive manner are watching their bodily injury claims from third parties to be trending downward as a result.
Mr Maher concluded his statement by saying that the motor car insurance market in the UK can return to profitability if insurers work to stop fraudulent claims from slipping through their defences.