Motor fleet rate increases on the way & more to come
Friday, 14 August, 2009 Leave a comment
Truth is that the insurance industry has only resisted the ineveitable over the last 9/12 months due to the prevailing economic climate. I wonder if "Aon Pulse" saw wholesale redundancies within their Focus operations coming too?
More cynical readers may have already determined that this is another industry leader using the climate to reduce costs without too much thought for client service or the staff that are about to become, yet more, Government statistics!? I know what I believe…
Motor fleet rate increases on the way Broking
UK companies renewing their motor insurance policies in Q3 could face increases in premiums with 91% of underwriters predicting a rise, according to Aon’s Market Pulse.Advertisement This is in stark contrast to the predictions for Q2 in which every underwriter stated there would be no change in rates for this type of cover. As the economic downturn has worsened in the UK, companies have cut back on their motor fleets, spending less on insurance and therefore pushing up rates in order for insurers to remain profitable.
Aon’s Market Pulse also shows that 40% of underwriters believe rates will rise for casualty/liability insurance, while 35% believe the same for property insurance.Aon said the dramatic change in forecasts for motor insurance was symptomatic of a hardening market. The broker predicted these rises were set to continue for at least the rest of 2009 in order to return that particular market to profitability and prevent even more significant increases in 2010.
However, while some insurers are actively increasing their rates, new entrants to the market as well as the desire to retain market share means that overall, rate rises are predicted to be modest. However, companies with weaker risk management practices can expect the cost of their insurance to increase as insurers look to limit claim payouts.
Steve Redgwell, head of broking for Aon’s mid to large sized companies, said: "Insurers continue to tell us that they need to see an increase in rates soon in order to return to a sustainable level of profits. However, whilst their reserves are running low the overcapacity in some areas, fuelled by new market entrants and the competition among insurers for income, is keeping rates down.
"Aon maintains that, overall, we will see little change for property and casualty insurance, though it is expected that rates will rise for these categories in Q4. There is a strong consensus amongst insurers that motor rates will continue to increase slowly through Q3 and Q4 as current losses are simply unsustainable.
"There is definitely an opportunity for businesses to secure good rates in Q3, so long as they have strong risk management practices in place, before the expected rate increases in Q4 2009."