2017 has been a busy year for the UK motor insurance market, by any standards. From the Ogden cut in February followed by a partial drawback in September, to Insurance Premium Tax rises and the ongoing uncertainty over whiplash reforms.
Next year looks brighter, though, according to an EY study released last week, which said the motor insurance market
could return to profit in 2018.
Insurance Business asked general insurance giant
Allianz, and specialist motor insurer ERS, what the year ahead could look like for the motor market.
Jonathan Dye, Head of Motor, Allianz
“I would expect the discount rate to continue to be a key focus. We welcomed the recent announcement that the government intends to put forward new legislation which, if effective today, would set the rate at between 0% and 1%. At the same time, it’s important to consider that it will still take time to get legislation through the various stages required and while the current rate still applies, our underwriters will need to continue to take this into consideration.
“Brexit will of course be a consideration throughout the next year, as insurers progress towards understanding what it means for the industry in terms of our alignment to EU directives, decisions such as VNUK, and whether UK motorists continue to be able to drive into Europe with the same freedom and ease.
“Unfortunately, this year we have seen a number of terrorist attacks where vehicles are sadly used as weapons. The insurance implications for such events where vehicles are used for deliberate acts has already caused some debate throughout 2017. Following some proposed changes in the reinsurance market, a long term and sustainable resolution should be a priority next year.
“Finally, the rapid pace of technological developments will continue to be an important focus for motor insurers next year. This follows the Government’s announcement last week in the Autumn Budget to provide financial support to aid the development of autonomous vehicles. We believe regulation and a clear framework for the use and insurance of autonomous vehicles is key. At the moment there is much discussion surrounding the SAE Levels, how we define what is assisted or autonomous driving, and what data will be available in the event of an accident. Advancements in technology continue to play a role with regards to inflating the cost of damage claims which insurers will need to manage carefully.”
Ian Parker, CEO, ERS
“Overall there should be some premium respite for customers in 2018 after a difficult 2017. But with the Ogden rate reset and whiplash reforms yet to be timetabled, the recent run on rates seen as insurers second-guess the market could create further exposures into 2018.
“Ogden wasn’t a blip. It cost the market £3.5 billion. ERS led the market in our response, applying rate as relative to markets where PI claims experience is typically highest and lowest. For our specialist brokers, this provided certainty in unsettling times and ensured that we could continue to provide them, and their customers, with A+ rated capacity amid dwindling market capacity.
“Of course, overall motor profitability continues to mask big differences in actual performance. The bigger direct carriers appear from their Q3 results to be doing well (on the top line at least) but many others are struggling, particularly in commercial motor.
“So, while 2018 profits may well be assisted by the Ogden revision, this will be a one-off impact and so attention to all aspects of performance is needed to mitigate the future impacts of ‘shocks’ like Ogden for insurers, brokers, and of course customers.
“Any benefits from the whiplash reforms, once active, will not be seen in premiums until 2019. Careful scoping of the planned proposals is still needed, and evidence of success, as the risk is that we go from a regulated environment to an unregulated one, which may not see any savings at all.
“At ERS, we will remain laser-focused on specialism and writing for profit over volume in 2018. Despite the turmoil of the last year, we have seen significant growth in two of our growth niches of Prestige and Agriculture. We will also be working with our partner brokers to achieve greater alignment, through optimising our business to help them access and sell our specialist products more easily, without compromising on quality or service.
“At least IPT was held last week in the Autumn statement. Perhaps this is the start of some good news. Let’s wait and see.”
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