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There was a time when insurers could be relatively confident that investment returns would support them in times when underwriting proves less than profitable. Not so according to Fitch Ratings, which issued its latest prediction this week expecting another difficult 12 months for UK general insurers.

Rating agency Fitch issued its 2012 Outlook for UK Non-Life Insurance with a mixed picture for companies in that market. While its prediction was for stability across the industry, there was a belief that sustained low investment returns and negligible premium rate increases will most likely achieve no more than 'low-single-digit' values for both metrics. For example, its prediction for the sector's combined investment income is approximately £5bn for 2012, against a £9.1bn return in 2010 and £3.5bn in 2011.

Interestingly, while it paid lip service to the impact that claims costs are having to UK motor insurers' bottom lines, Fitch remained unconvinced that current legislative and regulatory moves will have the desired effect. "Fitch continues to believe that insurers that deal with these issues through tighter underwriting terms and superior claims management will hold an advantage over competitors that focus solely on pricing."

Motor insurance pricing has been kept firmly on the news agenda as the market dominated headlines this month. Subject to a study by the Office of Fair Trading the competition body is looking into the problem of rising premiums.

Now, the OFT says it will complete a Market Study by March 2012 and could refer its findings to the Competition Commission which has the necessary statutory powers to ring any changes. "The OFT has launched a market study into the supply of private motor insurance in the UK," it said. "This follows the completion of a three month call for evidence on the market. The evidence us reasonable grounds for suspecting there are features of the market for the supply of private motor insurance in the UK are restricting and/or distorting competition."

Nick Starling, director of general insurance at the Association of British Insurers, responded: "We are particularly encouraged that the OFT recognises the highly competitive nature of the market," a sentiment which was echoed by other bodies including the Lloyd's Market Association, British Insurance Brokers' Association and so on.

Interestingly, the words of one anonymous contributor to the OFT investigation were reported in the Telegraph, providing a unique insider perspective. "We did not plan to grow," the insurance company manager said anonymously. "This is due to competitors' pricing of motor insurance policies, which has increased considerably in recent years. We simply raised our prices in line with the market and made more profit. We didn't need to do this. Actually we do not want to get too much share of the market as we wouldn't physically able to service it."