According to consultants Ernst & Young, the motor car insurance industry in the UK won’t begin turning a profit again until 2014.
Car insurance rate price increases over the past two years had led many experts to believe that the insurance industry, which hasn’t been profitable for over 18 years, would finally dip into the black, but with prices leveling off in the beginning of this year, Ernst & Young predicted that car insurance companies will need to weather underwriting losses for an additional two years instead. Stable premium rates and low investment returns both mean that profitability is most likely out of reach through both the rest of this year and the entirety of 2013, according to Ernst & Young actuarial team partner, Catherine Barton.
The Association of British Insurers says that, due to steadily rising accident claims, intense competition, and weak prices, the insurance industry as a whole has incurred more in costs than it takes in from customers in the form of premium payments since 1994. There are some insurance providers that have been making profits overall thanks to good returns on other investments, but much of this income has since dried up after the 2008 banking crisis saw central banks slashing interest rates.
Ernst & Young reported that claims figures will continue to rise until at least April of next year, when new legislation goes into effect designed to curb the influence of ‘no win no fee’ injury claims, as insurers blame these claims as one of the primary drivers for their increased costs.