Motor insurers in the UK suffered an underwriting loss in 2015 which may continue and even deepen this year, according to an analysis by business advisory firm Deloitte.
Figures from Deloitte showed that the motor insurance sector was still struggling to generate an underwriting profit even if premiums grew by 5% to £13.9bn in 2015.
Deloitte said the net combined ratio for the sector was 102% in 2015, which denoted that £102 was spent on claims and expenses for every £100 of premiums earned.
The consultancy firm projected that the net combined ratio could climb to 104% in 2016 before returning to 102% in 2017.
Deloitte also told insurers that customers will be looking for the cheapest deals amid higher insurance taxes and rising premiums, which could spike to £440 this year.
“Large rate increases and changes to insurance premium tax have meant many consumers’ pockets have suffered,” said James Rakow, insurance partner at Deloitte.
“Drivers are going to continue shopping around for the best deal, so building brand loyalty will be more important than ever. Insurers will need to work harder to tailor products and premiums to individual needs,” he added.
Rakow also said that the motor insurance sector will look “very different” in the coming years, with insurers being affected by broader trends such as declining car usage due to public transport and the rising proportion of older drivers.
“Combined with the long-term expectations for autonomous cars to become the norm, motor insurance is going to look very different in the future,” he said.
“Insurers will need to change how they think about risk, as our roads fill up with smarter cars over the coming decade.”