A 37-page report examining the UK motor insurance market will be released later this week by advisory firm Oxbow Partners, which looked at what potentially lies ahead and where the opportunities might be amid a particularly hard market.
“This is undeniably a tough time to be a motor insurer,” wrote Oxbow Partners in the report, an excerpt from which is available online. “Shareholders and boards will be asking questions around where all the profit has gone. However, there are opportunities.
“Those who have the capacity to invest can grow market share during one of the hardest markets we have seen. The market will return to pre-COVID levels of profitability by 2024, but the distribution of that profit could be quite different from 2019. Companies with lower expenses should be the natural winners here as they should be able to offer the best prices while still remaining profitable.”
According to Oxbow Partners’ analysis, there will likely be a gradual reduction in the combined ratio for the market over the next two years. The company’s forecast is 106% for 2023; 100% in 2024.
“Moving into 2023 we expect to see some improvement for motor insurers,” Oxbow Partners said. “The pricing cycle remains hard with premiums increasing faster in the first quarter than many had expected. Motor insurance customers will have seen increased prices both from their existing insurer at renewal and when searching for the best deal from other providers.
“This will ultimately put the industry in a better position once the new rates earn through. Claims costs remain elevated, however, and though we foresee some easing in the rate of claims inflation, the absolute costs should continue to rise.”
Meanwhile, the firm expects operating profit for the market to reach £1 billion in 2023. It was noted that the projected figure is 25% higher than the corresponding sum last year but is 26% lower than 2019’s £1.4 billion.
In the full report seen by Insurance Business, Oxbow Partners outlined its expectations in terms of premium, claims, expenses, combined operating ratio, other income, and operating profit. The consultancy modelled the UK personal lines motor market using individual company data for 21 insurers and underwriters while also referring to external market data and interviews.
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