UK companies renewing their motor insurance policies in the third quarter could face increases in premiums with 91% of underwriters predicting a rise, according to Aon’s Market Pulse.
This is in stark contrast to the predictions for the second quarter 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.
The Aon Market Pulse is a quarterly index that tracks the UK underwriters’ premium predictions for property, liability and motor fleet insurance. The insurers surveyed underwrote £23.5 billion worth of premiums for UK companies in 2008.
The Pulse 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 is symptomatic of a ‘hardening’ market, when insurers look to drive up premiums. These rises are set to continue for at least the rest of 2009 in order to return this market to profitability and prevent even more significant increases in 2010.
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, while their reserves are running low the overcapacity in some areas, fuelled by new market entrants and the competition amongst 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.”