Specialist motor insurer ERS says it is optimistic despite a year of “significant disruption” in the UK motor market which saw its profits take a hit.
ERS announced a loss of £12.2 million for 2017, down from a £21.7 million loss in 2016, which it said reflected two successive years of impact from the change in the Ogden discount rate and one-offs.
As a result, Combined Operating Ratio (COR) for the year stood at 104.9%, compared to 108.4% the year before. Without these impacts, COR would have been 97.9%, ERS said.
Underlying trading “remained strong” with double-digit growth in core specialist products.
Gross Written Premium for 2017 was £376.1 million, down from £406.1 million in 2016, which ERS said was expected as it had taken a lead in implementing price increases following Ogden and exited underperforming classes “where required rates were not being sustained in the market.”
That market strategy is bringing benefits to the ERS franchise, it said, with the highest ever number of presentations being received from brokers and a new record high of 41% of brokers now considering ERS “first for specialist motor risks.”
ERS CEO Ian Parker told Insurance Business that despite the impact of events like Ogden on the insurer’s financials, he is “optimistic for the year ahead,” particularly with the hope of 2018 bringing some clarity on where the discount rate will settle.
“The measures we put in place following Ogden position us well to face the challenges in 2018, but it might not be the same for many carriers especially in commercial motor insurance, and particularly on the back of January reinsurance renewals,” Parker said.
The fact that the direct insurers have posted “some very strong results” may indicate that in the mass market motor space, compared to the specialist segment, there will be more competition to grow than protect margin, according to the CEO.
“I wouldn’t want to be in the mass market space right now. The direct players are competing for high-volume, low-margin business, which is dominated by machine learning, algorithms and comparison websites.
“Their results have been very strong, so perhaps the top of the cycle has been reached in that space. However, for ERS, we know that there is a significant segment of the market which just can’t get cover through these channels and need advice because their vehicle or driving history makes their risk a bit different. Our team is made up of skilled underwriters who understand these complex and specialist risks which, mixed with our unwavering strategy to only write for margin not volume, gives us an edge.”
Brokers remain key to the business, which Parker said has made significant investments in building specialist teams that brokers can turn to for niche expertise.
“The value of a broker to consumers can’t be underestimated, especially in a period when motor insurance premiums have risen significantly in the last few years,” the CEO said.
“Consumers can’t query a comparison website algorithm, but a broker can explain why prices change and help find the product that best fits their needs – there’s a real opportunity for brokers to fulfil this role for consumers. Additionally, where the risks are really complex, like a farm estate or fleet of vehicles, you need an expert to be able to help find the right product – we think the role of the broker is as strong as ever in these specialist areas.”
