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Daily Insurance Industry News
Monday 24th of September 2018
March 14, 2008

No profit in sight for private motor business

by Gill Montia

Story link: No profit in sight for private motor business

No profit in sight for private motor business

AA Insurance is not in agreement with a recent assessment of the profitability of private motor insurance business by market analyst, Datamonitor.

The latter is predicting that private motor insurance will show a profit in 2009, for the first time in 14 years.

However, AA Insurance thinks this is unlikely because of inflation and the strongly competitive nature of the market.

According to Andrew Strong, chief executive of AA Insurance, the cost of damage to property and vehicles is currently increasing by around 5% a year.

In addition, the cost of settling personal injury claims continues to rise at around 10% per annum, as accident victims become more aware of the benefits of making personal injury claims.

AA insurance is forecasting that the cost of claims will move around 12% ahead of the cost of inflation during 2007/08.

With this in mind, Mr Strong believes that: “in order to reach profitability in 2009, premiums will have to rise by at least 20% over the next two years”.

Meanwhile, the cost of cover is being driven down, with the majority of online consumers primarily basing their choice of policy on price.

 

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