The Oxbow Partners’ latest Motor Market report has painted a positive picture of the overall health of the motor insurance market in the UK, saying that 2024 will bring more money to the table, with profits expected to reach a whopping £1.25 billion – or almost five times higher than last year.
“Within our forecast based on 19 of the largest insurers and underwriters in UK motor insurance, we expect earnings to increase substantially in 2024 and 2025, although the high levels of profit seen during the COVID years of 2020 and 2021 are not likely to be repeated,” read the report written by Oxbow Partners’ head of marketing intelligence Paul De’Ath (pictured).
However, inflation has a critical role to play in the market’s profitability, and the earnings will depend on how market players respond to soaring prices.
“The outcome is not going to be the same for all players in the space,” De’Ath said. “Some players were faster to respond to the inflation of 2022 and 2023 than others and may be more willing to begin to capture volume while others maintain margin in 2024. The dynamics of this playing out over 2024 and into 2025 will be critical to determining how profit is distributed across the market as well as the drivers of this profitability.”
It was noted that average premium growth was more than expected at 25% - compared to predictions of 16%. It was also explained that 2023 outperformed expectations, with IFRS 17 being a key reason why.
When we consider profitability of the market, our forecast of 106% COR for 2023 was worse than the actual result of 102%,” it was stated. “It is worth noting that the 2023 actual is under IFRS 17 rather than IFRS 4. We believe that under IFRS 4 the combined ratio would have been closer to 110% and above our estimate. The combination of both higher premiums and claims has led to the market remaining unprofitable in 2023, in line with our expectations. The high rate increases in the second half of 2023 will earn through this year, however, so the market is starting in a much better margin position than it was at the start of 2023.”
You can read the full report here.
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