Further cuts in motor insurance premiums await policyholders | Insurance Business UK
It was recently revealed where motorists could be insured for only £533, on average. Now Fitch Ratings says it expects motor insurance providers to slash premiums – albeit with caution – as reforms get rolled out.
“As we said in 2016 when the government first announced its proposals to limit whiplash compensation, a fall in claim costs should lead to lower premiums, given the competitive nature of UK motor insurance,” noted the credit rating agency. “Likewise, the government’s September 2017 proposal to revise the Ogden discount rate, which would lead to lower lump-sum payments to cover long-term care costs and lost earnings, should also lead to lower premiums.”
Citing the 7% quarter-on-quarter drop in the average premium quoted on Confused.com in the first three months of 2018, Fitch Ratings is also on the lookout for insurance sales data from the Association of British Insurers, which it believes would confirm the reduction in prices.
If all goes as envisioned, the proposed reforms are slated to be in place a year from now. And it seems insurance firms have begun adjusting prices in anticipation, according to the credit rating agency.
“We expect insurers will gradually reduce premiums further as the new rules become more imminent, and again after they take effect – if there is evidence that claim costs are falling at least in line with expectations,” it said. “However, we think insurers will take a cautious approach to price cuts, given that some of them overestimated the impact of previous attempts to reduce personal injury claims, significantly weakening their underwriting performance.”
Meanwhile Fitch Ratings does not expect the reforms to have a material impact on insurers’ profitability or credit profiles.