Keep your eyes on the UK motor insurance market because it seems that profits are set to surge in the sector.
That’s the verdict of EY, which has today issued its latest UK motor insurance analysis and predicts a strong upturn in profits during 2018.
In its analysis it points to the Ogden rate being adjusted to between 0% and 1%, as well as whiplash reforms, sparking the surge with 2017 profitability already close to breaking even at a predicted 100.8% net combined ratio compared to the previous forecast of 103.3%.
It outlines that motor premium rates are currently at record highs having leapt by 10% during the last 12 months – but now it suggests that premiums should fall between 2% and 4% on average, potentially leading to savings of around £21 annually for the average motorist.
Whiplash reforms meanwhile, should provide further relief, potentially securing an 8-10% reduction – meaning a potential £45 could be saved once the reforms are implemented.
“The revised Ogden Rate proposals in September have provided something of a reversal in the motor insurance industry’s fortunes,” said Tony Sault, UK general insurance leader at EY. “While the changes announced earlier in the year meant the insurance industry was facing an additional cost of £3.5 billion, the revised proposals could see up to £2.5 billion shaved off this figure. The reversal is also expected to have a positive effect on premium rates for consumers and we would expect the premiums to start to fall next year in anticipation of the new legislation coming into force.
“The proposed whiplash reforms are also expected to benefit claims costs and premiums later next year, although there is a risk that the weight of Brexit legislation will not leave Parliament enough time to pass the promised Civil Liability Bill. The industry though, is certainly facing a much better end to the year than it had feared back in February and its prospects are looking a great deal brighter.”