Car Insurance -
Insurer predicts car insurance premium rise - 04/09/2007
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Car insurance premiums could rise faster than inflation, insurer Admiral has warned.
The insurer is set to increase its own prices by five per cent during 2007, as a response to rising costs for insurers, and following the example set by Norwich Union.
Meanwhile a recent study by actuarial firm EMB reveals that despite consumer sentiment that car insurance premiums are high, the industry has been subsidising premiums in recent years to maintain market position while repair costs and personal injury claims have increased.
However, high levels of claims from the recent floods means such internal subsidies may not continue.
EMB senior consultant Paul Moorshead said: "There's clear evidence that [insurers] have been using some of these profits to cross-subsidise their motor book. That will stop in light of the heavy claims they're getting from the floods.
"Our analysis shows that insurers have been able to subsidise motor premiums because of reserve releases due to better than expected levels of personal injury claims in the past few years, but this won't go on forever."
Looking forward, Admiral's chief operating officer David Stevens said: "Whether [premium inflation] accelerates into 2008 will depend heavily on the underlying profitability of the market."
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