The £200m in 2005 compares with a loss of £70m in 2004. A reduction in claim frequency in 2005 helped keep the increase in claims costs to a minimum in a year when the industry’s premium income saw only 2% growth.
At £200m, the loss is much smaller than figures seen in the 1990s. However, this year’s total was buoyed up by reserve releases of nearly £600m from prior year’s claim reserves. £600m is the largest amount ever released by the industry and it had a significant impact on the net operating result this year.
In 2005, once investment returns are taken into account, Deloitte estimates the industry made £500m profit.
This is the fifth year in a row that motor insurers have made a profit in the region of 5% of revenue, which now adds up to an estimated industry total of £2.5bn over the period. Deloitte are predicting claims will outstrip premiums again over the next two years with net operating ratios of 109% for 2006 and 110% for 2007.