While it’s easy to point the finger at the nation’s car insurance companies in order to ask them just where in the world are all those premium payments going to, it’s easy to forget that the entire motor industry in the UK hasn’t turned an underwriting profit in 18 years straight – but this year could be different, for once.
It’s common knowledge that Brits pay way too much for motor car insurance. Younger drivers are especially hardest hit, as they spend an average of 1/5 of their yearly salary on annual car cover, and insurers say that prices are so high because of their operating costs, which include paying out on motor accident claims.
However, Deloitte, a major accountancy firm, said that the motor insurance industry managed to narrow its losses over the course of 2011 by a substantial margin. Insurers paid out £1.06 in legal fees and compensation payouts for every £1 they collected in premiums from their customers, leading to an approximate £600 million underwriting loss collectively.
This sounds like a massive figure – and it is – but it’s much better than previous year, where insurers spent £1.20 per £1 it collected, according to James Rakow, an insurance partner with Deloitte. The accountancy firm expects an improvement in results from the motor insurance industry in 2012, added Mr Rakow, up to and including an underwriting profit.
The punishing rate hikes that British drivers have been weathering over the past few years have actually helped the motor insurance industry get back on track, especially since the pressure to remain competitive usually leads to the price of insurance cover falling periodically. However, with new legislation proposed that could make it harder to bring spurious car accident claims, insurers’ costs could plummet in the future, which could lead to the possibility of cheaper rates for consumers overall.