As a broker you would be forgiven for being somewhat confused about what is happening in the insurance industry right now as there has been a number of conflicting reports from a range of insurers. This means it’s extremely hard for insurance brokers to protect their businesses while offering their customers competitive quotes, ultimately meaning that they could be losing out on potential leads.
Back in August the AA reported that motor insurance premiums were slowly increasing as in the three months leading up to the end of September the cheapest levels of cover increased by 1.2% (£6) to £531. Furthermore, the average motor insurance policy was up by 4.2% over the same period to £891, however on average insurance premiums are still 14.4% lower compared to a year ago. Janet Connor, managing director of AA Insurance, said: “Premiums are, on average, now similar to their 2010 level and are no longer economically sustainable.
“I believe this small upward movement in premiums will lead to further modest increases over the coming months.” Rather surprisingly the AA were wrong when it came to their prediction, as according to a number of leading car insurance providers premiums have fell drastically over the past few months. Shares in Esure fell by 6 per cent earlier this month after the company reported that their premiums fell by 7.4% on average in the past three months.
Stuart Vann, chief executive at Esure said: “We have seen some signs of rate stabilisation in the UK motor market but it is too early to say if this represents a turn in the motor rating cycle or is a consequence of rating seasonality. We have remained disciplined in our approach, while continuing to position the business for future growth.” Discussing the situation, analysts at Barclays said: “To its credit, we believe Esure is doing exactly the right thing and trying to increase pricing ahead of the market to offset claims inflation.
“The company is sacrificing policy growth for pricing. However, there are not enough peers following Esure’s lead, and we view it as unlikely that we will see a material improvement in UK motor pricing.” There are a number of factors which have contributed to the recent fluctuations in insurance premiums, most notably the government trying to clamp down on false whiplash claims and an increasing amount of competition in the market.
At the end of October a number of insurance brokers and finance specialists stated that they were unimpressed with the government’s attempts to cut down on false whiplash claims, with Alicia Alinia, a lawyer at the firm Slater & Gordon, saying: “We are concerned that insurance premiums continue to rise despite legal costs in all claims having significantly reduced following a raft of legislative changes.
“For the first time in ten years there has been a reduction in motor insurance claims yet the insurance industry fail to pass on these savings to the motorist. So far the industry have remained silent on calls to work with the legal profession and provide transparent data on instances of fraud. There needs to be greater scrutiny of the insurance industry as to the real cause of the increasing rise in insurance premiums.”
However, recent reports have shown that companies such as Esure have had to reduce their premiums in order to stay competitive in a market that is becoming ever more saturated. The increase in aggregator sites means that consumers now have more choice when it comes to their insurance provider and therefore in order to stay competitive brokers have had to offer lower rates.
So what does this mean for motorhome insurance brokers? While at present premiums seem unaffected by reductions in general motor policies, this is something brokers have to be prepared for. The close attention to premiums in the insurance sector by its regulators and the government means it is essential to be on top of all claims and how they affect the loss ratio. It is essential brokers have a strong model of the type of business they are looking to place.
With the future of the insurance industry looking so uncertain, now is the time for brokers to take stock of their businesses and adapt their strategies. It takes a certain amount of skill to find the right balance between competitive rates and a strong amount of cash flow, which is why now is the time to start thinking about your business and how it may have to change in the future.
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