Insurers have taken the main hit when it comes to the personal injury discount rate being cut, but the ripple effect has not yet finished working its way through the market, according to Aviva’s chief distribution officer.
“As far as an insurer’s concerned we’ve had the main hit around Ogden. As far as the market’s concerned… it’s a bit like a snake digesting a big mammal – it will keep working its way through the system, and I think we’ll still be seeing the impact in rates in a year’s time,” Phil Bayles told Insurance Business.
While Bayles, who is responsible for Aviva’s relationships with the UK broker market, said he viewed the change to the Ogden rate as “manageable,” he said the effects would take time and come in different waves.
“I think we’ve had wave one, which is people making the first adjustments post-Ogden and you’ve seen it come through in the financial results,” he said. “Wave two will be when the reinsurance contracts come up, and obviously the reinsurers will be needing to increase their rates as well.”
Capacity is also likely to move around, including the withdrawal of some capacity in the motor markets, Bayles said, though that is likely to take longer to manifest.
“The overall market is not growing significantly,” he explained, describing the impact on motor rates as a result of the Ogden change as the “first significant rate movement we’ve seen in any class of business for a long time.”
Of the current challenges in the market, Bayles named a flat market as one of the main hurdles.
“You have a market which has been pretty flat, and in a flat market things become pretty competitive because there’s not much moving around.”
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