15 July 2009 / by Rachael Stiles
Car insurance premiums will have to rise by at least 20 per cent in order for insurance providers to make a profit, according to the latest research from Defaqto.
The independent financial research company has calculated that the average increase in car insurance premiums in 2008 – around 8.7 per cent – was not enough to bring back any underwriting profitability for car insurance companies.
Defaqto explains in its report ‘Motor Insurance 2009: Another Bumpy Ride’, that in order to become more profitable, the car insurance market will have to charge customers an additional 20 per cent.
While rate increases have already been implemented, these are not enough to ensure profitability will return to the car insurance industry, Defaqto says.
Mike Powell, principal consultant for general insurance at Defaqto, commented: “Motor insurers are going to need to think carefully about choosing to write for profit or market share. They are not going to be able to do both. Even in the commercial motor market, where there has been consistent profitability for the past few years, profitability is on a knife edge.”
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