November 24 2014 Latest news:
Ben Woods, Business writer
Wednesday, June 11, 2014
Motorists may have to stomach a car insurance price rise despite radical government reforms to take cost out of the system, Aviva has warned.
Increased competition between insurers, pressures on cost, and a determination from claims management companies to bypass regulation could all play a part in bringing falling premium prices to an abrupt end, the insurer said.
Rob Townend, Aviva’s UK and Ireland claims director, said it was vital that the insurers did not become complacent, and should push for further legislation to tackle fraud, regardless of a recent “win” for the industry, which saw it enjoy its first collective annual profit in 20 years.
According to consultants at EY, insurers paid out £98.50 for every £100 received in premiums last year in only the second time the sector has swung to profit since its study began in 1985.
It comes as premium prices plunged by 14.1pc in January as government measures to crack down on the country’s soaring compensation culture began to take hold.
“If you look at the last 12 months the you will find that the consumers are winning because prices are dropping and the insurance sector has also made some money,” Mr Townend said.
“The measures introduced by the Ministry of Justice have been a step in the right direction. But we cannot be complacent.
“Motor insurance is circular and it is competitive, people come in and out, and there are things that we can do as an industry to reduce premiums. “But potentially premiums could come back up. It depends how we make sure the reforms remain in place because people will now be trying to work around the legislation.”
He said the industry had experienced a rise in care costs and pressures on repair costs because of the complexity of vehicles within the market.
“For the first time the insurance industry and the government have made some really good steps – and now we need to maintain this,” he added.
The Association of British Insurers recently released research that showed how fake car crashes helped push the level of insurance fraud to a record £1.3 billion in 2013, an 18pc jump on the previous year and more than double the cost of the UK’s shoplifting bill.
The government’s measures to tackle the problem include cutting fees for personal-injury lawyers, and banning payments for exchanging the details of policyholders.
Last week Justice Secretary Chris Grayling also pledged to cut questionable whiplash claims by improving medical assessments, and announced plans to ban lawyers from encouraging people with incentives like cash or iPads.
However, EY warned that it may be too early to start celebrating a turning point for motor insurance profits, because of the way insurers release reserves they have held to cover potential claims.
The EDP Top100 company’s latest accounts revealed that it paid out £96 for £100 received in premiums last year.
• Do you have a business story for the Eastern Daily Press? Contact business writer Ben Woods on 01603 772 426 or email firstname.lastname@example.org
An oil and gas company has revealed bold plans to build a new £3m premises and create 50 jobs.