Insurance Age - Motor industry insurance profits ‘unlikely in 2009’, says AA insurance

Insurance Age - Motor industry insurance profits ‘unlikely in 2009’, says AA insurance: "Motor industry insurance profits ‘unlikely in 2009’, says AA insurance

The claim by Datamonitor that the UK motor insurance industry will make a profit in 2009 is unlikely to be realised, AA Insurance believes.

Britain’s leading car insurance broker points to continuing claims inflation and premium competitiveness as key factors that will make profitability in two years’ time unlikely.

Andrew Strong, CEO of AA Insurance, said that the cost of claims is showing no sign of slowing. “The cost of damage to property and vehicles is rising by around 5% per year. On top of that we are seeing personal injury claims continuing to increase by 10% per year as accident victims are more willing to make such claims these days.”

In 2007, AA Insurance believes that the cost of claims will outstrip the cost of inflation by around 12%: in other words, for every £100 received in premiums, £112 is being paid out in claims.

“In order to reach profitability by 2009, premiums will have to rise by at least 20% over the next two years,” Mr Strong said. “Online buying means that buyers are much more likely to shop around for car insurance and buy on price. That is keeping premium rises in check.”"

The AA’s benchmark British Insurance Premium Index shows that premiums rose by an average of 5.9% during 2007 and are expected to rise by a similar amount during 2008.

Mr Strong added: “So far this year we have not seen industry premiums rise by anything like the amount that would make the industry profitable. It remains a very volatile and competitive