Insurers feeling the squeeze from costly insurance claims

Car insurance companies have been feeling the squeeze from costly insurance claims, as last year they ended up paying out more than £1.20 for every £1 they collected in premium payments.

Car insurance comparisonsite, together with Towers Watson, compiled the statistics, revealing that the average car insurance rate for comprehensive cover increased by a factor of 2.7 per cent in 2011’s second quarter.  This marks the fourth quarter in a row in which rates have been adjusted upwards.

Price inflation rates have been on the decline, however.  Prices rose by 38 per cent last year, while annual inflation for 2011 has been measured at only 24.8 per cent so far.

Prices are still continuing to go up for consumers who are trying harder and harder to find discount car insurance quotes to no avail.  Annual cover now costs £858 on average, which is £22 higher than it was three months ago and £170 higher than it was one year prior.

Male motorists aged between 26 and 35 saw their expenses go up the most in this past quarter.  Third party fire and theft policy prices increased by a margin of 1 per cent as well, though this represents the smallest rise for this type of cover in the past three years.

Towers Watson director, Duncan Anderson, commented on the results by saying that some companies seem to have decided on easing off rate hikes as 2010’s price increase have begun to have an effect on this year’s financial performance.

However, he remarked that it was unclear whether the insurance market has been able to adjust their rates to a point where they will return to profiability.  Effective fraud prevention and claims management were two key ways to get a handle on insurer costs, the Towers Watson director added.

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