Car insurance companies set to make a profit as premiums outstrip claims

A report from market analyst, Datamonitor, has said that UK’s private motor insurance market look set to make a profit next year for the first time in 14 years.

A spokesperson for Datamonitor said 2009 could be a historic year for the private motor insurance market, putting an end to a painful 14 consecutive years of losses.

According to Datamonitor, car insurers are expected to make a profit of £30 million in 2009 as income from premiums outstrips the cost of claims.

The lack of profit in the industry has been caused by sharp increases in the cost of claims, particularly in relation to personal injury, which had driven up overall costs for the sector.

Furthermore, intense competition among the different players has made it tough for insurers to raise their prices as they fought for market share.

Datamonitor said the market has lost millions of pounds each year, as insurers’ costs outstripped their revenue, even when the premiums charged to drivers increased.

However, Datamonitor said that the sector’s profitability won‘t last long as the market will make a loss again in 2010 as competition increases.

Discuss this in the Finance Markets forums

Story link: Car insurance companies set to make a profit as premiums outstrip claims