The profitability of UK motor insurers is to remain under pressure as the struggle to keep premium rates ahead of rising claim costs looks set to continue, Fitch Ratings says.
While it’s difficult to hike prices without losing business, Fitch says several insurers emphasised their focus on defending profitability rather than market share when unveiling their 2018 results.
Fitch points out that prioritising market share at the expense of profitability could lead to rating downgrades.
The report underlines a number of factors driving this pressure, including surging costs related to a recent rise in car theft, as well as higher claims from credit hire firms, which arrange repairs and offer courtesy vehicles for not-at-fault drivers after an accident, and then look to recoup the costs from the insurer of the at-fault driver.
Fitch says UK motor insurers reported slightly increased underwriting profits for 2018, despite market pressure.
However, this was largely due to one-off reserve releases in anticipation of an increase in the Ogden discount rate, which would lead to lower lump-sum payments for bodily injury claims to cover long-term care costs or lost earnings.
The UK government confirmed this week that the review of the Ogden rate will now proceed, with a decision on or before August 5.
