Insurance profitability to be short-lived
12th July 2022Tweet
The UK motor insurance market achieved an underwriting profit in 2021 with a Net Combined Ratio of 96.6%.
This follows its best ever results (90.3%) achieved in 2020 and has been attributed to lower levels of commuting through the year leading to fewer claims.
However, EY’s latest UK Motor Insurance Results warns that profitability is likely to be short-lived with continued inflation throughout the year contributing to a predicted NCR of 113.8% in 2022.
The report also predicted a small rise in premiums of just two per cent this year before surging by a further 18% in 2023.
Rodney Bonnard, UK Insurance Leader at EY, said, “The sector has had a good couple of years, but the profitability achieved during the pandemic is largely masking the underlying impact of inflation amid an increasingly soft market. Going forward, motor insurers will need to continue to very carefully manage their cost challenges while developing a platform for growth.”
Richard Reed, UK General Insurance Market Lead at EY, added, “Looking ahead, there are significant challenges on the horizon. Consumer premium rates have remained fairly low and are far below the level needed to keep pace with inflation and the return to more normal traffic levels. This means the 2022 and 2023 environment will be tough, even if the market is able to increase rates rapidly over the second half of this year.”Tweet